Articles | March 1, 2023

What Is the Segal Blend?

The Segal Blend is an approach to valuing a multiemployer pension fund’s unfunded vested benefits for withdrawal liability purposes. As the name suggests, the Segal Blend was initially developed by Segal’s actuaries and combines the liabilities calculated using two interest rate assumptions.

Construction Site Meeting

What's covered

This article discusses:

  • The origins of the Segal Blend
  • The purpose of withdrawal liability
  • What’s blended in Segal Blend
  • The impact of the Segal Blend
  • Arbitration and litigation about the Segal Blend
  • The future for the Segal Blend

When did the Segal Blend come about?

In 1980, the Multiemployer Pension Plan Amendments Act (MPPAA) amended ERISA to address issues facing multiemployer plans. MPPAA introduced the concept of withdrawal liability for multiemployer defined benefit (DB) plans. The Segal Blend was developed after the passage of MPPAA to recognize the complexities of multiemployer plan dynamics when a contributing employer withdraws from the plan.

If an employer contributing to a multiemployer DB pension plan withdraws from the plan, any of its employees who are vested in the plan are still entitled to benefits under the plan. MPPAA therefore requires that employer make additional payments to cover its share of the plan’s unfunded vested benefits (i.e., it requires the employer to cover the benefits that the employer promised to its employees). Withdrawal liability payments provide protection for the plan participants by funding promised benefits. Withdrawal liability assessments reflect that the cost of and risks to the plan will be borne by the remaining employers and not the withdrawing employer.

MPPAA requires the Enrolled Actuary for the plan to calculate the unfunded vested liability for withdrawal liability purposes based on the actuary’s “best estimate” assumptions. A withdrawing employer may challenge the assumptions selected by the Actuary, but the burden of proof falls to the employer to demonstrate the assumptions selected by the Actuary were unreasonable. If there is a dispute between a plan and an employer over a withdrawal liability determination, it generally must first go to arbitration prior to being heard by a court.

As a leader in multiemployer retirement consulting for decades, we work with hundreds of multiemployer plans for which the Enrolled Actuary uses the Segal Blend. We also work with numerous multiemployer plans for which the Enrolled Actuary uses other methods in determining their “best estimate” assumptions. Use of the Segal Blend or similar methodologies is not unique to Segal — many Enrolled Actuaries who are not employed by Segal have also used some variation of the Segal Blend for withdrawal liability purposes.


What's the purpose of withdrawal liability?

The purpose of withdrawal liability is to protect the financial integrity of multiemployer plans, the plan’s participants and remaining employers. Withdrawal liability is generally assessed when an employer stops contributing to the plan, leaving the remaining employers with all ongoing risks and funding obligations — including the obligation to pay benefits to the withdrawing employer’s employees. Since the employer will cease to have any ongoing funding obligations to the plan and will not be involved in the future of the plan, the payment of withdrawal liability has been traditionally viewed as being akin to a final settlement between the employer and the plan.

Boards of trustees generally are required to assess and collect withdrawal liabilities. Enrolled Actuaries who use the Segal Blend do so because it reflects their best estimate of future experience under the plan as a final settlement between the withdrawing employer and the plan.

What’s blended in the Segal Blend?

The Segal Blend involves two separate calculations of the plan’s vested benefit liability. The results of those calculations are then blended together to form the basis for determining an employer’s withdrawal liability.

The first liability calculation recognizes that the withdrawing employer is entering into what is essentially a final settlement of its obligations (e.g., the benefits it promised its employees) and is transferring all ongoing risk to the remaining stakeholders (e.g., the plan required to pay those benefits). Using the settlement framework, this first liability calculation is intended to reflect what the employer would pay if it purchased annuities at current market rates. The Segal Blend uses rates published quarterly by the PBGC based on its survey of insurance company annuity purchase rates for this purpose.

The second liability calculation uses the actuary’s assumption of future investment returns selected for purposes of determining the plan’s minimum funding requirement under ERISA. This approach is used to the extent that liabilities are not currently fully funded under the first calculation, to recognize that the withdrawing employer is allowed to pay the unfunded portion of its liability over a period of up to 20 years.

A simple example follows.


Mechanics of the Segal Blend  


Vested benefits on funding basis (using assumptions for determining minimum funding of the plan)



Market value of assets



Vested benefits at market value (using PBGC assumptions)



Funded percentage on market basis



80% of vested benefits at market value

80% of $100 = $80


20% of vested benefits on a funding basis

20% of $90 = $18


Vested benefits for withdrawal liability


Market value of assets



Unfunded vested benefits for withdrawal liability



What’s the impact of the Segal Blend?

The rationale for using the Segal Blend is based on an understanding of how employer withdrawals affect multiemployer plans, and the Enrolled Actuary’s best estimate of future plan experience. Over the years, the Segal Blend has resulted in both lower and higher withdrawal liabilities compared to a withdrawal liability determined using the assumptions selected for minimum funding purposes.

Following the adoption of MPPAA in 1980, market (short-term) interest rates (and therefore PBGC rates) were much higher than the long-term rates that actuaries were generally selecting for minimum funding valuations. As a result of this relationship, the Segal Blend yielded lower withdrawal liability amounts.

More recently, historically low interest rates in the financial markets are below the return assumptions selected by actuaries for minimum funding purposes. The Blend methodology has generally yielded higher withdrawal liability amounts than a calculation using only funding assumptions.

How do arbitrators and courts view the Segal Blend?

Challenging the Segal Blend and withdrawal liability generally is not new, but arbitrators and courts have long accepted the use of the Segal Blend for calculating withdrawal liability. We are not aware of any arbitration or court decision that rejected use of the Segal Blend for withdrawal liability purposes for more than 35 years following the inception of withdrawal liability. 

Prior to 2018

In 1983, only three years after MPPAA was enacted, an excerpt from the arbitrator’s decision in Sotheby’s v. Local 814 PF explains:

Segal has earned its reputation by devotion to its discipline as evidenced by the scholarship and training of its senior actuaries; its use of reviewing and steering committees; and, its requirement that its policies and procedures be uniformly implemented, subject to the unique experience of each fund, thereby avoiding any assertion that its methodology was “result-oriented” or, in other respects, arbitrary or unreasonable.

The making of actuarial assumptions, by law, requires an actuary, for withdrawal liability purposes, to use his best estimate of anticipated experience. The Arbitrator is satisfied that, in adopting the blended rate, Segal fulfilled its statutory mandate… Segal manifested an adherence to its obligation to constantly review the components and underlying data of its assumptions and to make modifications to them as required ...

In 1992, the U.S. Supreme Court decision in Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal upheld the constitutionality of withdrawal liability. While often cited by opponents of the Segal Blend as prohibiting its use, the Supreme Court in fact upheld the calculation of employer withdrawal liability by the Enrolled Actuary using the Segal Blend.

Arbitration and Litigation Supporting the Segal Blend, 1983–2013  


Perkins Trucking Co., Inc. v. Local 807 Labor-Management Pension Fund


Foodtown Stores, Inc. v. United Food and Commercial Workers-Industry Pension Fund


Classic Coal Corp v. UMW 1950 and 1974 Pension Plans


Ells v. Construction Laborers Pension Trust of Southern California


Joy v. IAM


Bassett Construction Company v. Centennial State Carpenters Pension Trust Fund


East St. Louis Castings Co. v. M.I.R.A. Molders and Allied Workers Pension Fund


J.L. Denio v. Operating Engineers Pension Trust


Trustees of the Plumbers & Pipefitters Nat'l Pension Fund v. MAR-LEN, Inc.


Sotheby's Inc. v. Local 814, IBT Pension Fund*


Widoff’s Modern Bakery v. Bakery and Confectionery Union and Industry International Pension Fund


Embassy Industries v. UAW 365


Block Communications, Inc. and Buckeye Telesystems, Inc. v. Central States

* Rejected strict interpretation of Concrete Pipe


New York Times Co.

Unanimous judicial support for the Segal Blend changed in 2018 when a district court rejected use of the Segal Blend in New York Times Co. v. the Newspaper and Mail Deliverers’-Publishers’ Pension Fund. The case concerned the New York Times’ withdrawal from a multiemployer pension fund, which had been upheld by an arbitrator. The plan appealed, but the case was settled before the Second Circuit Court of Appeals reached a decision.

Manhattan Ford Lincoln, Inc.

Shortly after the decision was handed down in the New York Times Co. case, another district court upheld use of the Segal Blend in Manhattan Ford Lincoln, Inc. v. UAW Local 259 Pension Fund. The decision noted:

Minimum funding and withdrawal liability are different concepts under ERISA with different, although related, policy concerns. … Funding is an ongoing process, subject to adjustment for an employer that is remaining in the plan. … Withdrawal liability, however, is calculated once, as of the time of withdrawal. Should the unexpected occur after that employer’s departure, the burden may unfairly fall on other plan employers… The risk-transfer and settlement models of withdrawal liability recognize a more complicated reality than the one embodied in minimum funding levels.

Interboro Fuel Corp.

In July 2020, an arbitrator upheld use of the Segal Blend. In Interboro Fuel Corp v. Local 553 Pension Fund, the arbitrator stated:

Just because in one isolated case, which was either wrongly decided, as [the Fund] urges, or was fact specific to the parties, that is, the New York Times case, does not mean every withdrawing employer may cite that case as a basis to overturn the Segal methodology... All agree that there is no holding that renders [the Segal Blend] invalid or patently unreasonable. Even the New York Times case declared that to be so.

Sofco Erectors, Inc.

In May 2020, the district court ruled that “Although not unlawful to use different rates for funding and withdrawal liability pursuant to Concrete Pipe, there are legal grounds to find that the [Ohio Operating Engineers Pension Fund’s] use of the Segal Blend in this instance was erroneous.” However, the court did not clarify the legal grounds that led to its conclusion to overturn the arbitration award supporting the Blend. The Fund appealed the decision to the appellate court.

In September 2021, the Sixth Circuit Court of Appeals ruled in Sofco Erectors, Inc. v Trustees of the Ohio Operating Engineers Pension Fund that the Segal Blend did not reflect the Fund’s anticipated experience for purposes of calculating withdrawal liability. While recognizing that the use of the Segal Blend represented “perhaps… a laudable policy proposal,” the court rejected its use based on a very narrow view of the meaning of the statutory language “anticipated future experience of the plan.” The court’s view precludes the ability of an actuary to follow usual Actuarial Standards of Practice, which prompt the actuary to consider the purpose of the measurement. Notably, the court decided not to rule on whether actuaries must always use the same actuarial assumptions for purposes of both minimum funding and withdrawal liability.

Energy West Mining Company

In May 2020, the district court ruled in favor of the United Mine Workers of America 1974 Pension Plan’s use of PBGC interest rates (rates provided under ERISA §4044 based on insurance company annuity quotes, essentially reflecting a risk-free transfer of the obligation) in determining withdrawal liability. Although the Plan’s actuary did not use the Segal Blend, the court refuted the logic in the New York Times decision, noting, “nothing in ERISA’s text or in Concrete Pipe requires that the minimum-funding rate and withdrawal-liability discount rate be the same.” Energy West Mining Company, the withdrawn employer, appealed the decision to the federal District of Columbia Circuit Court.

In July 2022, the appellate court issued an opinion in United Mine Workers of American 1974 Pension Plan v. Energy West Mining Company reversing the district court’s decision. The panel of judges ruled that, absent regulations from PBGC, the interest rate assumption used for determining withdrawal liability must be “similar” to the assumption used for minimum funding purposes, because both represent the actuary’s best estimate of anticipated experience under the plan. While the case involved the use of solely risk-free rates to determine withdrawal liability (not the Segal Blend), the decision calls into question any withdrawal liability assumptions that are not “similar to” those used for minimum funding.

In August 2022, the plan petitioned for a rehearing by the full District of Columbia Circuit Court. A group of stakeholders and professional service firms in the multiemployer pension community filed an amicus curiae (friend of the court) brief in support of a re-hearing. The brief asserted that the panel’s decision misinterprets the applicable statue and interferes with actuarial discretion. Signatories for this brief included Segal, Milliman, Horizon Actuarial Services, Cheiron, United Actuarial Services (UAS), the National Coordinating Committee for Multiemployer Plans (NCCMP), the National Retirement Fund, Sheet Metal Workers’ National Pension Fund, the SEIU National Industry Pension Fund, the National Pension Fund (UNITE/HERE), the NY State Teamsters Conference Pension and Retirement Fund and the LIUNA National (Industrial) Pension Fund. That petition was denied in September. On February 24, 2023, Segal filed an amicus curiae brief with the U.S. Supreme Court. Segal was joined in the brief by Cheiron, Milliman, Horizon Actuarial Services, United Actuarial Services, the NCCMP, the LIUNA National (Industrial) Pension Fund, the National Retirement Fund, the New York State Teamsters Conference Pension and Retirement Fund and the Sheet Metal Workers’ National Pension Fund.

MNG Enterprises, Inc. DBA Digital First Media

The district court affirmed an arbitrator’s decision that use of PBGC interest rates by the GCIU-Employer Retirement Fund was not the actuary’s “best estimate of anticipated experience under the plan.” The fund appealed the decision to the appellate court.

On October 28, 2022, the Ninth Circuit Court of Appeals issued an opinion in GCIU-Employer Retirement Fund v. MNG Enterprises, Inc., DBA Digital First Media affirming the lower court’s holding. The three-judge panel held that use of the PBGC interest rate, without consideration of the “experience of the plan and reasonable expectations,” did not satisfy the “best estimate” standard.

Importantly, the Ninth Circuit Court of Appeals did not address the legitimacy of the Segal Blend. Rather, the court explicitly stated in a footnote that it expressed no view as to the actuary’s use of PBGC interest rates as “a starting point or a component in a blended rate.”

PBGC’s proposed rule on withdrawal liability actuarial assumptions

On October 14, 2022, PBGC published its proposed rule on withdrawal liability actuarial assumptions, under a statutory basis provided under MPPAA, that had never been promulgated by the Agency. As we discussed in our October 17, 2022 insight on the proposed rule, “The proposed rule provides acceptable interest rates, not subject to the “actuary’s best estimate,” that range from PBGC interest rates to the rate selected by the plan’s actuary for ERISA minimum funding purposes.

In general, any approach that blends PBGC annuity rates and the minimum funding rates, such as the Segal Blend, falls within the proposed range and is acceptable.

Other methods and assumptions required to calculate withdrawal liability (other than the interest rate assumption) must still be reasonable (taking into account the experience of the plan and expectations) and, in combination, reflect the actuary’s best estimate of anticipated experience under the plan.

The proposed rule would apply to a determination of withdrawal liability for withdrawals that occur on or after the effective date of the final rule. However, “the proposed rule does not preclude the use of an interest rate assumption described [in the proposed rule] to determine unfunded vested benefits before the effective date of the final rule.”

The period for public comment closed on December 13, 2022. Segal filed a comment in support of the proposed rule as did many others, including the NCCMP, the American Academy of Actuaries and several actuarial service providers.

PBGC’s most recent regulatory agenda lists June 2023 for publication of the final rule. We will continue to monitor the PBGC’s action regarding a final rule.

What’s the future for the Segal Blend?

For both Sofco and Energy West, the courts noted that regulations from PBGC on withdrawal liability assumptions could displace their decisions.

In the absence of a final rule from PBGC, it appears the Sofco decision is settled law for plans in jurisdiction of the Sixth Circuit: Michigan, Ohio, Tennessee and Kentucky.

Given the Energy West decision, trustees for plans in the jurisdiction of the District of Columbia should seek advice from their legal counsel regarding using actuarial assumptions for withdrawal liability that are not “similar” to those used for minimum funding purposes. Similarly, trustees of plans in the Ninth Circuit (Alaska, Arizona, California, Idaho, Montana, Nevada, Oregon, Washington, Guam, Hawaii and Northern Mariana Islands) should engage in discussions with legal counsel on the impact of the appellate court’s statement regarding the use of PBGC interest rates in a blended approach. For plans in both jurisdictions, forthcoming final regulations from PBGC may be an important consideration.

Actuaries serving plans in other jurisdictions may continue to use the Segal Blend.

Segal’s history with multiemployer plans runs deep.

Learn about our work with multiemployer plans.

See Our Expertise

See related insights

Senior Man On A Laptop

SECURE 2.0 Retirement Reform Becomes Law

Learn more about the SECURE 2.0 retirement reform and how it affects your plans.
Businesswoman Presenting To Team

Reporting & Disclosure Guide for Benefit Plans 2023

Get our annual guide to compliance requirements for sponsors of health and retirement plans.
Two Coworkers Discussing Work

PBGC Final Rule on Multiemployer SFA: Solvency Through 2051

The PBGC released a final rule on the multiemployer Special Financial Assistance (SFA) program

This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.