The Life Expectancy of Actuarial Equivalence Lawsuits

Michelle Jackson

Emily S. Costin

Nearly six years after the first actuarial equivalence lawsuit was filed in 2018, this wave of litigation shows no signs of stopping. More than 30 lawsuits have been filed against large pension plans, including at least 15 cases filed since 2022.

This year, courts have issued a flurry of opinions, but no court has issued a favorable judgment on the merits for any of the respective pension plan participant plaintiffs.

Generally, participants in pension plans accrue benefits in the form of a single life annuity but can select other “optional” forms of benefits, such as a joint and survivor annuity, which provides payments to a surviving spouse if the participant dies first.

When a JSA is calculated, plans use a conversion factor, calculated by applying an interest rate and mortality table. These assumptions are documented in the pension plan’s governing documents.

Under the Employee Retirement Income Security Act, these optional forms of benefit must be “actuarially equivalent” to the form in which the benefit accrued (commonly known as the “normal” form). The statute, however, does not provide an explicit definition of actuarial equivalence, an explicit requirement that actuarial assumptions be reasonable or a requirement that actuarial assumptions be updated.

This has resulted in cases that involve complex legal questions about statutory interpretation and technical factual questions about what assumptions are reasonable.

The lawsuits challenge the mortality tables used to calculate optional forms of pension benefits as being “old” or “outdated” and, therefore, “unreasonable.” The plaintiffs argue that, because mortality rates continue to improve over time, using allegedly outdated mortality tables results in lower monthly payments for the participants or surviving spouse.

The law firms that introduced this novel legal theory have described it in public filings as “cutting-edge” and “entirely untested on the merits.” As one of the law firms championing these cases described in a public filing, “Plaintiffs’ legal theory has not been litigated through trial in any case to date, there are no appellate decisions directly on point.”

That’s true, and no court has yet fully resolved these questions. A resolution on the merits will likely come down to a battle of the experts on highly technical actuarial issues.

But six years after the first lawsuit was filed, no court has held that this theory is valid or that any specific assumptions are unreasonable. These lawsuits have, however, reached other resolutions.

Two courts resolved the legal issues at earlier stages in litigation by concluding that ERISA does not impose any reasonableness requirement.

Other courts have rejected that same legal argument and other arguments at the motion-to-dismiss stage. Courts have denied at least 15 motions to dismiss since these lawsuits were first filed.

Some courts have granted dismissal in part. The U.S. District Court for the District of Delaware dismissed a breach of fiduciary duty claim brought against DuPont because the “fiduciaries do not breach their duties under ERISA merely by administering a pension plan according to its written terms.”

Additionally, the U.S. District Court for the Southern District of New York recently based its dismissal of a case brought against IBM on statutes of limitations grounds.

Five cases were voluntarily dismissed or stipulated to dismissal. Another five cases have settled.

The remaining cases are at various stages of litigation, none close to reaching a resolution this year. The next potential decision on the merits could come from the first lawsuit filed, Masten v. MetLife; the parties’ briefing on summary judgment concluded in March.

In the six years since these cases were publicly filed, there has not been legislative or other regulatory guidance proposed addressing this mortality table issue. Additional regulatory guidance seems unlikely in the current political environment.

While plan sponsors and fiduciaries continue to review their plan documents to ensure ERISA compliance, not a single court opinion has adopted the plaintiffs’ legal theory or required plan sponsors to update plan actuarial assumptions.

Courts will continue to wrestle with these questions for the foreseeable future, leaving little threat to the life expectancy of the actuarial equivalence lawsuits.

Emily S. Costin is partner in Alston & Bird’s ERISA Litigation team and advises clients on strategies to address complex employee benefit claims.

Michelle Jackson is an associate on the same team and advises clients on the evolving intricacies of ERISA litigation.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS Stoxx or its affiliates.