[00:00:00] Speaker 04: Place number 20-7054, United Mine Workers of America, 1974 Pension Plan et al. [00:00:07] Speaker 04: versus Energy West Mining Company, Abelant. [00:00:10] Speaker 04: Mr. Roth for the Abelant, Mr. Killian for the Abelies. [00:00:17] Speaker 05: Good morning, Mr. Roth. [00:00:18] Speaker 03: Good morning. [00:00:19] Speaker 03: May it please the court, Yakov Roth for Energy West Mining Company. [00:00:24] Speaker 03: Your Honours, the actuary for the pension plan here [00:00:27] Speaker 03: expects the plan's invested assets will return 7.5% on average per year. [00:00:36] Speaker 03: And the actuary uses that 7.5% investment return assumption in order to present value the plan's future benefit obligations when determining the plan's minimum funding requirements. [00:00:51] Speaker 03: But when it comes to withdrawal liability, [00:00:53] Speaker 03: The actuary measures the present value of those same future benefit liabilities using the risk-free PBGC rates. [00:01:02] Speaker 03: Here we're about 2.7%. [00:01:04] Speaker 03: Even though he does not use those PBGC rates for any other purpose, and even though they have nothing to do with the plan's anticipated experience. [00:01:16] Speaker 03: That change here nearly tripled the appearance of the plans underfunding [00:01:23] Speaker 03: and therefore nearly tripled Energy West's liability. [00:01:26] Speaker 02: Mr. Roth, if we agree with you on the best estimate question, should we skip the identicality question like the Sixth Circuit did? [00:01:42] Speaker 03: Well, Your Honor, they're independent grounds for the same outcome here, which is to use the 7.5% rate of return. [00:01:51] Speaker 03: I'm not going to tell the court which ground to rest on or whether it wants to reach both or or not. [00:01:55] Speaker 03: I mean, I think they're both important for for actuaries to understand the constraints they face. [00:02:02] Speaker 02: But should I can I take from your answer then that assume assume that I agree with you on the best estimate ground? [00:02:12] Speaker 02: Assume that I think the identicality question is hard and that as a general rule of court ought not decide more law than is necessary to decide the case. [00:02:23] Speaker 02: you don't see any significant downside to us going the route of the Sixth Circuit and punting on the Identicality question and ruling in your favor on the Best Estimate question. [00:02:34] Speaker 02: Is that correct? [00:02:36] Speaker 03: That's correct, Your Honor, certainly for this case. [00:02:37] Speaker 03: I mean, there are situations in the future where it could make a difference. [00:02:40] Speaker 03: In this case, it wouldn't. [00:02:42] Speaker 03: In this case, it gets you to the same place. [00:02:44] Speaker 02: Let me if you'll if you'll bear with me for something of a [00:02:50] Speaker 02: winding question, but then I'll get out of your way and get out of my colleague's way. [00:02:54] Speaker 02: Imagine this is what I think. [00:02:58] Speaker 02: Tell me whether I'm on track or off track here. [00:03:03] Speaker 02: The best estimate of anticipated experience means just about what it says. [00:03:09] Speaker 02: That means exactly what it says. [00:03:11] Speaker 02: The actuary has to project what he thinks the plan will do. [00:03:15] Speaker 02: And we know the actuary's best estimate in this case, it's 7.5%. [00:03:21] Speaker 02: And an actuary can only have one best estimate. [00:03:25] Speaker 02: There's only one best. [00:03:28] Speaker 02: But that prediction can be a range. [00:03:33] Speaker 02: It can have something of a confidence interval, you know, 95% confidence, you know, from here to here, and then you've got outliers. [00:03:40] Speaker 02: And within that confidence interval, [00:03:43] Speaker 02: reasonable actuarial methods allow an actuary to be more cautious in calculating withdrawal liability than minimum funding liability. [00:03:56] Speaker 02: Almost certainly, it doesn't allow the actuary to do what the actuary did here and depart from 7.5% as much as the actuary did. [00:04:05] Speaker 02: But there is a range that's acceptable [00:04:08] Speaker 02: And where an actuary lands on that range doesn't have to be exactly the same for the minimum funding liability and the withdrawal liability. [00:04:19] Speaker 02: Do you think there's something to that? [00:04:22] Speaker 03: Well, Your Honor, if you put aside the concrete pipe point and the idea that they have to be consistent, then yes, I agree with Your Honor that that would be the right way to look at it. [00:04:31] Speaker 03: Now, we think that because of concrete pipe, [00:04:34] Speaker 03: The best estimate for anticipate of anticipate experience really does have to be the same in the two contexts. [00:04:39] Speaker 03: That's what the court said use the term necessity and must be used for other purposes as well. [00:04:44] Speaker 03: So that's the real reason why we think [00:04:47] Speaker 03: They need to be the same, but if you put that aside and you just look at the language of then yes, I agree, you could have it's not a single number it's a range there's there's a certain amount of professional discretion and deference that we give to the actuary so long as they're trying to do the right thing. [00:05:05] Speaker 03: They're trying to measure anticipated experience, and maybe in one context they try to measure it in a little bit more conservative a way than in another context, and that would still be fine. [00:05:14] Speaker 03: Of course, that's not at all what happened here, which is sort of the key point for this appeal here. [00:05:19] Speaker 03: He said, I don't care about plan experience. [00:05:21] Speaker 03: I'm not interested in it. [00:05:22] Speaker 03: I'm just picking this off the shelf. [00:05:23] Speaker 03: benchmark rate that is risk-free, that represents returns on a hypothetical portfolio of treasuries or corporate bonds, that's not what the statute tells the actuary to do. [00:05:35] Speaker 03: And so that deference that we would otherwise give to the actuary doesn't kick in. [00:05:39] Speaker 03: As Judge Larson explained in Sophco last month, he's just doing the wrong thing and he can't isolate himself from review by saying, well, I was reasonable in doing something the statute didn't tell me to do. [00:05:51] Speaker 05: Mr. Mr. Roth, your argument for the, for the idea that the withdrawal rate minimal funding rate should be the same rest largely on concrete pipe, but can you. [00:06:06] Speaker 05: But I'm not sure that your argument is so solid when you look at the actual text of the statute. [00:06:13] Speaker 05: I mean, you know, the language that's used in those provisions is different. [00:06:18] Speaker 05: And so I'm wondering, what is your argument concrete pipe was decided before the statutory amendments? [00:06:24] Speaker 05: So so where would we find within the statute, the idea that the rates must be identical as a matter of law, which is what you are arguing? [00:06:36] Speaker 03: Sure, yeah, Your Honor. [00:06:39] Speaker 03: So there is a part of the statute that remains identical across the two, which is the language actuary's best estimate of anticipated experience under the plan. [00:06:47] Speaker 03: That language appears verbatim in these two sections. [00:06:50] Speaker 03: Change that occurred since concrete pipe is that for minimum funding, each individual assumption also must be reasonable, whereas for withdrawal liability, they have to be reasonable in the aggregate. [00:07:03] Speaker 05: Isn't that a meaningful difference? [00:07:05] Speaker 03: It is a meaningful difference in this sense. [00:07:07] Speaker 03: And actually, this court explained it pretty well in the classic Cole decision back in 1991, the leading case on that language. [00:07:16] Speaker 03: In the aggregate language is basically functioning as a harmless error rule for assumptions. [00:07:21] Speaker 03: So if you have an assumption that's wrong, but it's offset, it's skewed one way, but then there's another assumption that's skewed the other way. [00:07:28] Speaker 03: And [00:07:28] Speaker 03: court can conclude or the arbitrator can conclude, it basically, you know, comes out in the wash, then the employer is not entitled to relief. [00:07:36] Speaker 03: And so I think that is a difference between the two contexts. [00:07:40] Speaker 03: But it's not a difference that matters here because nobody has argued or even suggested [00:07:45] Speaker 03: that there's any offset here when this interest rate assumption inflated the liability by somewhere in the neighborhood of $75 million, tripling what it otherwise would have been. [00:07:57] Speaker 03: So I think there is that difference, but I don't think it comes into play in a case like this. [00:08:02] Speaker 05: That doesn't support your argument that they should be an identical, right? [00:08:08] Speaker 03: I think it's that they should be identical, but if they're not, [00:08:11] Speaker 03: and it's in a way that is essentially harmless, then you can't get relief from that. [00:08:16] Speaker 03: So that's where I would say, I would say the difference comes in terms of when you're entitled to relief from that deviation. [00:08:24] Speaker 00: I'm taking you back to the Sixth Circuit for a moment. [00:08:28] Speaker 00: Judge Larson, if I recall, and I don't have the case in front of me, went rather far and declared that Seagull Blend to be the method of doing [00:08:38] Speaker 00: of operating in that context. [00:08:40] Speaker 00: Would the record in this case support such a decision on our part here? [00:08:46] Speaker 03: So Judge Larson said that the Siegel blend, which is when you mix the funding rate and the PBGC rate, she said comply with the statute. [00:08:55] Speaker 03: This case is actually a force URI, because they didn't even blend it. [00:08:58] Speaker 03: They just said, we're just doing the PBGC rate. [00:09:00] Speaker 03: We're ignoring the actual anticipated plan experience. [00:09:04] Speaker 03: So I think this case actually is stronger. [00:09:07] Speaker 03: And the same conclusion would follow, which is the PBGC rate, unless the actuary is going to come in and tell you [00:09:13] Speaker 03: the plan is actually planning to sell off all of its stocks and buy annuities, the PBGC rate is not an appropriate assumption to use. [00:09:23] Speaker 03: Now, the plan actually, in its 28-J response, the SOFCO sort of gestures in that direction, says, oh, actually, PBGC rates here really do represent plan experience because we're going to sell off everything. [00:09:38] Speaker 03: That's just not what the actuary testified here. [00:09:41] Speaker 03: It's not what the arbitrator found. [00:09:42] Speaker 03: It's not what the district court held. [00:09:43] Speaker 00: I guess what I may be really trying to ask is, if we decide that your claim is correct, is valid, do we strike the computations and send it back for a whole reprocessing? [00:10:00] Speaker 00: Do we have some method of reaching a definitive result on the rate we have now? [00:10:06] Speaker 00: Sure, yes, Your Honor. [00:10:07] Speaker 03: Well, there isn't any dispute in the record that this actuary's best estimate of the plan's investment experience was seven and a half percent. [00:10:16] Speaker 03: I mean, he said that the plan admits that in its brief. [00:10:18] Speaker 03: So that's undisputed. [00:10:20] Speaker 03: And so if that's the right measurement, if that's what the actuary is supposed to be computing, [00:10:26] Speaker 03: then it's as easy as saying you recalculated at seven and a half percent. [00:10:30] Speaker 03: That's what the court did in SOFCO. [00:10:31] Speaker 03: That's what the court did in New York Times Company. [00:10:33] Speaker 03: That's sort of the standard because there isn't an alternative that's been proper. [00:10:38] Speaker 05: Mr. Roth, if I could just follow up on Judge Santel's question about remedy. [00:10:42] Speaker 05: So if we agreed that the rate that was used here is unreasonable because it's unlawful and not consistent with the statute, but we do not agree or we want to hold the question about whether it has to be identical, what does the remedy look like in that case? [00:11:00] Speaker 05: We reverse the district court, we remand for the arbitration award to be vacated, [00:11:06] Speaker 05: And then does the actuary calculate a new rate under the statutory term? [00:11:13] Speaker 05: What exactly would happen in your view? [00:11:16] Speaker 03: Well, in our view, Your Honor, the actuary was clear that 7.5% represented his best estimate of anticipated plan experience. [00:11:24] Speaker 03: He didn't say it's a rate. [00:11:26] Speaker 03: That was the number he gave, and that's what the plan says in the brief. [00:11:28] Speaker 03: That's their investment return assumption. [00:11:31] Speaker 03: So if you agree with our construction of the statute, the investment return [00:11:35] Speaker 03: assumption is a relevant metric of anticipated experience in this context, then it's as simple as saying, yes, the judgment below is reversed and with instructions to vacate the assessment and have it recalculated by the fund using the 7.5% investment return assumption. [00:11:55] Speaker 03: Again, that's been the case in the other cases that have followed this logic. [00:12:00] Speaker 05: Are there other assumptions that an actuary might use in the context of a withdrawal calculation that are different? [00:12:10] Speaker 05: Different from minimum performance, right? [00:12:13] Speaker 03: That was the only one here that was different. [00:12:16] Speaker 03: So in other words, he said, the actuary said, yeah, I use the same assumptions except for on investment return where I switched to risk-free. [00:12:24] Speaker 03: because he thinks it's sort of as a policy matter, that's a more fair way of doing it, which I understand, it's just not what Congress directed. [00:12:36] Speaker 05: Do my colleagues have any further questions? [00:12:39] Speaker 01: Thank you, Your Honors. [00:12:41] Speaker 05: Thank you. [00:12:44] Speaker 01: Good morning, your honors, and may it please the court. [00:12:46] Speaker 01: I'm Brian Killian on behalf of the 74 plan. [00:12:49] Speaker 01: And I'd like to start with the SOFCO decision, same as the court in Energy West did. [00:12:54] Speaker 01: In that case, the Sixth Circuit did not hold that categorically it is impermissible for an actuary to use risk-free rates when discounting in this context. [00:13:02] Speaker 01: What the Sixth Circuit held more narrowly was that you may not use risk-free rates when risk-free investments are not part of the plan's anticipated experience. [00:13:12] Speaker 01: But if ever there was a plan that anticipated risk-free investments in the future, it was the 1974 plan. [00:13:18] Speaker 01: In 2015, it was among the worst off multi-employer plans in the United States. [00:13:23] Speaker 01: And so every single actuary in this case, including Energy West's own actuary, Mr. Hittner, testified that the looming financial distress of this plan warranted using a rate that was less than the 7.5% return rate that the plan had been earning in the short term. [00:13:41] Speaker 01: You see Judge Walker, there's a difference between the 7.5% that the plan was earning on its current investments in the mid 2010s [00:13:47] Speaker 01: versus what the plan was expected to earn in the long run, because the plan was going to have to change its investment mix. [00:13:55] Speaker 01: What it was currently invested in in the mid-2010s was not sustainable in the long run because the plan was facing insolvency. [00:14:02] Speaker 02: And so Energy West... And it sounds like you're saying I just misunderstood it, which is perfectly possible. [00:14:10] Speaker 02: I thought that the 7.5% was supposed to be the actuary's best estimate [00:14:16] Speaker 02: of not just what would be earned the next year, but that what would be earned each year forever on average. [00:14:27] Speaker 02: I see Mr. Roth nodding his head. [00:14:29] Speaker 02: So Mr. Roth, we'll get to you in rebuttal. [00:14:32] Speaker 01: Mr. Gillian, what do you think? [00:14:34] Speaker 01: We disagree with that characterization of the 7.5%, Judge Walker. [00:14:37] Speaker 01: What the 7.5% represents is if you take the plan's current investment mix, and by current I mean mid-2015, [00:14:45] Speaker 01: and project that investment mix forward, what is that investment mix anticipated to return? [00:14:52] Speaker 01: And in the annual minimum funding context, that is the question that the actuary is tasked with deciding. [00:14:58] Speaker 01: If the plan stays on this trajectory and keeps its investment mix, what is it expected to return in the long run? [00:15:04] Speaker 01: But in the withdrawal liability context, the plan, excuse me, the actuary does not take for granted that the current investment mix will remain the long-term investment mix. [00:15:13] Speaker 01: but has to make an initial inquiry and a separate threshold decision of what kind of investments will this plan be able to tolerate in the long run. [00:15:22] Speaker 01: And as I was saying, every actuary in this case understood that come 2022, the plan was going to be insolvent. [00:15:29] Speaker 01: It was not going to be able to sustain or bear market return that it was able to get in the mid 2010s. [00:15:37] Speaker 01: And that is why the arbitrator in this case found as a fact [00:15:41] Speaker 01: that the approaching insolvency, quote, the plan, excuse me, because of the approaching insolvency, quote, the plan will certainly not be able to take the increased risks associated with investments with higher returns. [00:15:56] Speaker 01: This is on page 239. [00:15:58] Speaker 02: Did you make this argument before the arbitrator that, well, let me ask this. [00:16:04] Speaker 02: Did you argue something of the opposite in front of the arbitrator? [00:16:07] Speaker 02: Did you argue that the impending thing and solvency should not matter? [00:16:12] Speaker 01: No, we argued, we defended the PBGC rates on multiple grounds. [00:16:18] Speaker 01: The ground, as your honor noted, that is permissible under the Actual Standards of Practice. [00:16:23] Speaker 01: But we also defended it after Energy West interjected the best estimate argument, which wasn't until after the hearing and after the New York Times decision, the arbitrator let us introduce supplemental briefs. [00:16:34] Speaker 01: And it was at that time that Energy West for the first time proposed a best estimate argument because Judge Sweet [00:16:40] Speaker 01: in the Southern District of New York was the first judge to sort of accept an argument along these lines. [00:16:44] Speaker 01: And it was in that context where we pointed back to some of the evidence that had been adduced in the earlier part of the hearing and said that we would satisfy it because of the looming insolvency. [00:16:54] Speaker 01: And I think it's important, Your Honor, to note that Energy West's own actuary also agreed that a rate below 7.5% was warranted because of the looming insolvency. [00:17:06] Speaker 01: Mr. Hittner proposed rates ranging from 3.8% [00:17:09] Speaker 01: all the way to six and a half percent. [00:17:11] Speaker 01: This is at pages 172 to 174 of the Joint Appendix, all because of this looming insolvency. [00:17:18] Speaker 01: And so that factual finding that the arbitrator accepted we think is dispositive under the Sixth Circuit's construction of SOFCO. [00:17:24] Speaker 01: Moreover, it is the same key fact and the same logic that this court upheld in the Combs versus Classic Cole case in an opinion written by Judge Chantel on behalf of the court. [00:17:35] Speaker 01: In Combs, the plan was the 1974 plan, the same one that's before you today, and it used a discount rate that was four percentage points below its current investment return rate. [00:17:45] Speaker 01: It was a five and a half percent discount rate for withdrawal liability and its current investment returns were nine and a half percent. [00:17:52] Speaker 01: And the court nonetheless upheld this court upheld that that discrepancy was. [00:17:56] Speaker 01: I'm sorry to draw. [00:17:57] Speaker 01: Yeah. [00:17:58] Speaker 05: So I mean some of these arguments go to the idea that the rates need not be identical, because perhaps looming insolvency, you know, affects the assumptions that should be made for for withdrawal liability. [00:18:13] Speaker 05: But that doesn't necessarily go to why the actuary imposed the risk-free PVGC rate, which is quite low and is not necessarily connected directly to the looming insolvency. [00:18:27] Speaker 05: So perhaps you're correct that they shouldn't be identical, but that doesn't explain why the risk-free PVGC rate is an appropriate one under the statutory term. [00:18:38] Speaker 01: A two-step analysis, Your Honor. [00:18:40] Speaker 01: I mean, the first question is, what is the plan's future investment portfolio going to look like? [00:18:44] Speaker 01: Then the second question is, what is the appropriate rate? [00:18:47] Speaker 01: Mr. Ruschow, Mr. Hittner, that was Energy West actuary, and Mr. Kra, who was our expert actuary, all agreed the plan's future investment portfolio was not going to look like its 2015 investment portfolio. [00:19:01] Speaker 01: and that's because the plan was spending $500 million a year on benefits and had approximately $3 billion. [00:19:07] Speaker 05: Future investment portfolio, where do we find that language? [00:19:14] Speaker 01: That specific language isn't used. [00:19:17] Speaker 01: Mr. Ruschow talked about at pages 69, 76, and 78 of the joint appendix. [00:19:23] Speaker 01: He said, [00:19:25] Speaker 01: Excuse me, he said PBGC rates are future return assumptions. [00:19:29] Speaker 01: He said that that's page 76 he said the market rate is effectively the PBGC rate that's at page 78 and at page 69 he explains why he uses a different rate for the annual minimum funding context and there. [00:19:43] Speaker 05: The statute talks about anticipated experience, which is both looking forward to what might be anticipated, but also experience, which is backwards looking as to what type of investment mix the plan has had or what type of performance it's had in the past. [00:19:59] Speaker 05: So you seem to be focusing only on the future investment mix, but what about the fact that there's also sort of a backward looking component to what the actuary has to consider? [00:20:12] Speaker 01: Well, Your Honor, in the aggregate reasonableness parenthetical, there's a specific reference to the past experience and the reasonable expectations. [00:20:21] Speaker 01: And then the best estimate requirement refers just to anticipated experience. [00:20:26] Speaker 01: What Mr. Rushout testified to at page 69 and 70 of the Joint Appendix is that what the plan was invested in in 2015 was not going to be its investment portfolio in the future. [00:20:39] Speaker 01: That was the anticipated experience that he was addressing and why he chose the PBGC rates. [00:20:44] Speaker 01: As I was saying, the plan's $3 billion in assets were expected to be liquidated over the next six years because it was spending $500 million a year on benefits. [00:20:53] Speaker 01: And so everyone agreed that by 2022, the plan's investment portfolio was not going to consist of equities that were returning approximately 7.5% in the mid-2010s. [00:21:03] Speaker 01: It was going to look radically different because the plan needed to be highly liquid in order to continue paying [00:21:09] Speaker 01: $500 million a year in benefits. [00:21:12] Speaker 01: And I wanted to point out before the time runs out that this was the exact logic that the court endorsed in the Combs versus Classic Coal case. [00:21:22] Speaker 01: The court said, quote, because of the weak funding position of the 1974 plan, [00:21:27] Speaker 01: the plan was unable, quote, to participate in the high interest rates in the long run. [00:21:32] Speaker 01: And so in 1991, when this court decided Combs versus Classic Coal, the discrepancy was 4%. [00:21:38] Speaker 01: Today for Energy West withdrawal, the discrepancy was 5%. [00:21:41] Speaker 01: But that's a reflection of the fact that the 1974 plan's investment position has gotten only worse in the last 30 years. [00:21:49] Speaker 01: It is one of the worst off plans in the United States. [00:21:53] Speaker 05: Mr. Killian, can I just ask you the same question about remedy? [00:21:58] Speaker 05: So if we were to conclude that the rate here was unreasonable, but that it need not be identical to the other rate, what exactly would happen with the remedy? [00:22:10] Speaker 05: Would the actuary be required to calculate a new rate? [00:22:14] Speaker 01: I think that, yeah, we would ultimately need to get ourselves back in front of the arbitrator for that determination, because as I've said a couple of times, Energy West's own actuary proposed four or five different rates. [00:22:25] Speaker 01: Our actuaries supported the use of the PBGC rates here. [00:22:29] Speaker 01: If your honors believe that they need not be identical, but that for some reason, the 2.8% PBGC rates are not substantiated, then the record is unclear as to what the appropriate rate would be in this particular circumstance. [00:22:45] Speaker 02: Killian, your brief among its themes is a sort of policy theme that if somebody is gonna come out not ahead here, it ought to be Energy West because they're the ones who have chosen to withdraw. [00:23:03] Speaker 02: In other words, if someone is gonna have to put up money to minimize risk, it should be Energy West and not the plan. [00:23:15] Speaker 02: I wonder why this policy point isn't stronger. [00:23:22] Speaker 02: No estimates perfect. [00:23:24] Speaker 02: When someone like Energy West withdraws from the plan and an actuary picks a withdrawal rate, there's going to be a windfall one way or another, up or down. [00:23:39] Speaker 02: And as a matter of policy, [00:23:43] Speaker 02: The actuary really ought to just do his best to minimize the windfall, regardless of whether it's going to be a windfall one way or a windfall, another way. [00:23:58] Speaker 02: a company like Energy West is allowed to withdraw. [00:24:02] Speaker 02: My understanding is they're not writing new rules or withdrawing from a plan that they were never allowed to withdraw from. [00:24:08] Speaker 02: You're allowed to withdraw. [00:24:10] Speaker 02: When you withdraw, there are these rules. [00:24:12] Speaker 02: Actuary, it makes this estimate and you pay this much amount. [00:24:15] Speaker 02: So why isn't the best policy here? [00:24:19] Speaker 02: Just the actuary should minimize what the windfall will be without worrying about who's more likely to get the windfall. [00:24:29] Speaker 01: Walker, I think I didn't mean to leave the impression that our brief was based on policy, not rather than statutory text and the concrete pipe decision. [00:24:37] Speaker 01: You know, they are. [00:24:38] Speaker 02: And I want to apologize if I left the impression that I thought that was the only theme of your brief or even the main theme of your brief. [00:24:44] Speaker 02: Both sides make strong arguments with regard to the statutes and lots of other arguments. [00:24:50] Speaker 02: But I do think there's a good guy, bad guy. [00:24:53] Speaker 02: It's their fault for withdrawing. [00:24:54] Speaker 02: So if somebody is going to have to pay a little more, it ought to be them and not the plant. [00:24:58] Speaker 02: So I'm just pushing back against that a little bit, seeing what you think. [00:25:01] Speaker 01: So here's what I'd say, Judge Walker. [00:25:03] Speaker 01: I think in the concrete pipe case, the Supreme Court understood that what Congress wanted in this context was deference to actuarial policy. [00:25:11] Speaker 01: I'm not an actuary. [00:25:13] Speaker 01: I don't set actuarial policy. [00:25:15] Speaker 01: I only can read the actuarial standards of practice, same as Mr. Roth and as your honors can. [00:25:20] Speaker 01: And the actuaries have decided that there is a range of options that are permissible for different actuarial and economic reasons in this context. [00:25:29] Speaker 01: One is the settlement rationale. [00:25:32] Speaker 01: One is the investment return rationale. [00:25:34] Speaker 01: I wouldn't say that one is a penalty. [00:25:37] Speaker 01: You know, the actuary is encouraged to make an independent determination about which is the best one for that plan that he's considering. [00:25:44] Speaker 01: And so, for instance, our actuary Mr rush out in this instance testified that he does not use the PVGC rates for every single plan. [00:25:52] Speaker 01: for many plans that are healthy, he uses the current investment return rate. [00:25:57] Speaker 01: And that's at pages 80 and eight to 82 of the joint appendix. [00:26:01] Speaker 01: But this plan was in a uniquely bad position. [00:26:05] Speaker 01: And because it was in a uniquely financially bad position, it was uniquely likely to have a future return that actually included the PBGC rates. [00:26:14] Speaker 01: In other words, Judge Walker, I think the multiple policies that are articulated in the actuarial standards of practice [00:26:20] Speaker 01: intersect in this case in future investment return rate and the settlement rate are basically the same thing for the 1974 plan. [00:26:29] Speaker 01: It's not that anyone is getting a windfall. [00:26:31] Speaker 01: It's just simply that this is a plan that was on the precipice and before Energy West withdrew [00:26:36] Speaker 01: as a result of the looming insolvency, its withdrawal liability was going to be very great as a result. [00:26:42] Speaker 01: Now, it's a large number, but as I said before, the plan spends $500 million a year on benefits. [00:26:48] Speaker 01: And so $115 million withdrawal liability represents barely three or four months worth of the amount of money that this plan spends. [00:26:55] Speaker 01: This is a monstrous plan that has catastrophically large liabilities and an inability to pay for them. [00:27:04] Speaker 01: So your honors, if I may conclude just real briefly, we haven't talked today about whether this court can review best estimate grounds under the statute. [00:27:14] Speaker 01: We've argued in our brief and without having questions on it, I guess I'll rest on the brief that the best estimate provision is not a basis for overturning an unfunded vested benefit determination. [00:27:25] Speaker 01: This court in Combs identified the only basis. [00:27:28] Speaker 01: and they were ratified by the Supreme Court in Concrete Pike. [00:27:31] Speaker 01: The only question is whether, quote, the combination of methods and assumptions employed in the calculation would be acceptable to a reasonable actuary. [00:27:39] Speaker 01: 30 years ago in Combs, this court found that this very combination of methods was reasonable, and it is still reasonable. [00:27:46] Speaker 01: The arbitrator found it generally is still reasonable. [00:27:48] Speaker 01: And for this particular plan that was in such dire financial situations, it was especially reasonable, and it was the best estimate. [00:27:56] Speaker 01: So Judge Nichols' decision should be affirmed. [00:27:58] Speaker 05: Thank you, Mr. Killian. [00:28:00] Speaker 01: Thank you. [00:28:01] Speaker 05: Does Mr. Roth have any time remaining? [00:28:05] Speaker 04: Council had no time remaining. [00:28:07] Speaker 05: We'll give you two minutes for rebuttal. [00:28:09] Speaker 03: Thank you, Your Honor. [00:28:12] Speaker 03: It sounded from most of that discussion that we're sort of in agreement, at least at this point, on the legal principle that the actuary is supposed to be projecting anticipated investment returns on the plan's assets. [00:28:25] Speaker 03: I guess, in light of soft go. [00:28:27] Speaker 03: And most of the discussion was about whether he actually did that. [00:28:31] Speaker 03: Your honor, I would point to page 79 of the joint appendix where the actuary was asked the question. [00:28:38] Speaker 03: When determining withdrawal liability Do you look at the investment mix of the plan. [00:28:42] Speaker 03: And he says, for withdrawal liability no. [00:28:45] Speaker 03: This is not, this is, you know, this is just a post-hoc argument. [00:28:49] Speaker 03: It's not what he testified. [00:28:51] Speaker 03: It's not even what the plan argued in their merits brief. [00:28:53] Speaker 03: The first sentence of part two of the plans brief says that Rochelle quote, did not consider the 1974 plans investment returns, which is not what he was looking at. [00:29:03] Speaker 03: He was picking a risk-free rate because he thinks that it's, that's as a policy matter, that's the right. [00:29:08] Speaker 02: I think Mr. Killian suggested that [00:29:11] Speaker 02: the actuary looked at the anticipated portfolio. [00:29:15] Speaker 02: Do you think that's what the actuary did here? [00:29:18] Speaker 03: There is zero evidence in the testimony of the actuary that he was looking at the plan's future investment returns on the plan's future investment mix. [00:29:28] Speaker 03: He said, I'm looking at risk-free returns on a risk-free portfolio. [00:29:32] Speaker 03: Never said the plan was going to buy a risk-free portfolio. [00:29:35] Speaker 03: There is no evidence that the plan was going to buy a risk-free portfolio and the plan has not bought a risk-free portfolio. [00:29:40] Speaker 03: of the plan was going to buy a risk-free portfolio, the minimum funding rate would also have come down to 2.7% because you are using that rate to value the same liabilities at the same points in the future. [00:29:51] Speaker 03: They're 10 years, 15 years, 20 years off. [00:29:54] Speaker 03: And you're trying to figure out if you have enough money now to pay for those future benefits. [00:29:59] Speaker 03: If you thought you were gonna be earning 2.7% a year, you would be using that to project the minimum funding needs. [00:30:06] Speaker 03: And he's not doing that. [00:30:07] Speaker 03: He's using 7.5%. [00:30:08] Speaker 03: There's no evidence that they've ever changed their investment mix or that the actuary cared one way or the other about that. [00:30:15] Speaker 03: And as a matter of, you know, the insolvency also, by the way, is now totally a fiction because they've been bailed out. [00:30:21] Speaker 03: So there is no insolvency. [00:30:23] Speaker 03: It's all kind of just this made up argument to try to get within the scope of SOFCO. [00:30:28] Speaker 03: So for that reason, Your Honor, we think it's clear 7.5% is the anticipated, the actuary's best estimate of anticipated investment return. [00:30:36] Speaker 03: And if that's what the statute means and SOFCO held, then the decision below has to be reversed and the assessment needs to be recounted. [00:30:46] Speaker 04: Thank you. [00:30:48] Speaker 04: The case is submitted.