The Life Expectancy of Actuarial Equivalence Lawsuits

Despite the volume of cases, no court has yet issued a favorable judgment on the merits for any pension plan participant plaintiff.

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.

Get more!  Sign up for PLANSPONSOR newsletters.

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The lawsuits challenge the mortality tables used to calculate optional forms of pension benefits as being “old” or “outdated” and, therefore, “unreasonable.” The plaintiffs argue that, because mortality rates continue to improve over time, using allegedly outdated mortality tables results in lower monthly payments for the participants or surviving spouse.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

Second Texas Federal Court Broadens Stay of DOL Retirement Security Rule

Decision in the American Council of Life Insurers’ case adds a stay on prohibited transaction rule.

Updated to include a comment from the Department of Labor.

A second federal court in Texas on Friday put a hold on the Department of Labor’s Retirement Security Rule, expanding beyond an earlier stay to all of the rule’s exemptions and saying that plaintiffs are “virtually certain” to succeed in their claims against the regulator.

An opinion issued in a case that has been heard by Federal Judge Reed C. O’Connor in the Northern District of Texas Fort Worth Division sided in part with the plaintiffs in American Council of Life Insurers vs. DOL, ordering a stay on the so-called fiduciary rule with the argument that it did not need further court review; but denying a preliminary injunction, which would put a hold on a rule until the court decides on its merits.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The final rule, which had been scheduled to take effect September 23, requires “trusted investment advice providers” and financial institutions working with them to operate as fiduciaries in most cases when advising on qualified retirement plan design, annuity sales and individual retirement account rollovers.

The Northern District’s denial was based in part on the court arguing that a new rule introduced by the DOL was similar to one knocked down by the 5th Circuit Court of Appeals in 2018 known as Chamber of Commerce v. U.S. Department of Labor.  

“As a whole, Defendants arguments [against the lawsuit] are nothing more than an attempt to relitigate the Chamber decision,” the motion reads. “Because the Fifth Circuit’s Chamber decision unambiguously forecloses all of Defendant’s arguments, the Court need not repeat why those arguments fail here.”

The suit, led by the American Council of Life Insurers along with eight other insurers, was filed May 24. The plaintiffs argued that the DOL’s rule exceeded its “authority under federal law, is arbitrary and capricious” and had the “same legal defects” as the rule attempted in 2016 that was eventually struck down by the Fifth Circuit Court of Appeals.

That suit was filed after a similar case was filed in the Eastern District of Texas by the Federation of Americans for Consumer Choice Inc., an advocacy group for independent insurance agents, along with other independent insurance agents. A judge granted the plaintiff’s request for a stay in that case on Thursday, with U.S. District Judge Jeremy Kernodle also writing that the plaintiffs are “likely to succeed” in their action.

‘Certain to Succeed’

The Northern District court sided strongly with the plaintiffs, saying the rule “is almost certainly unlawful for a broad class of investment professionals in the industry—not just the Plaintiffs.”

The court ruled that the plaintiffs’ arguments were sufficiently made to put a stay on the rule barring any further arguments before higher courts.

“Plaintiffs are virtually certain to succeed on their claims that the Rule exceeds DOL’s statutory authority, making remand insufficient and a potential waste of judicial resources,” the court wrote. “All interested parties deserve prompt resolution.”

The court also brought into the stay the DOL’s amendment to Prohibited Transaction Exemption 2020-02, 89, which plaintiff’s had argued “would impose obligations similar to PTE 84-24.” That exemption was not part of the Eastern District lawsuit. The DOL has said that PTE 2020-02 “ensured that those saving for retirement could have access to high quality advice by requiring fiduciary advice providers to render advice that is in their plan and IRA customers’ best interest in order to receive any compensation that would otherwise be prohibited by ERISA and the Code.”

The Northern District court’s ruling states that the DOL, in its rebuttal, did not “sufficiently identify any countervailing hardship” from a stay. “In the interim, consumers will remain protected by existing state and federal regulations, along with the 1975 Regulation,” the court wrote.

The plaintiffs, including the ACLI, National Association of Insurance and Financial Advisors, NAIFA-Texas, NAIFA-Dallas, NAIFA-Fort Worth, NAIFA-POET, Finseca, Insured Retirement Institute and National Association for Fixed Annuities responded with a joint statement backing the ruling.

“We are grateful to the court for its decision to issue a stay halting the September 23, 2024, effective date of the U.S. Department of Labor’s fiduciary-only regulation, the DOL’s latest attempt to vastly expand its statutory authority by imposing fiduciary status on almost every financial professional who sells retirement products,” they wrote. 

A ‘Good Thing’ Held

The DOL has argued over the course of creation and finalization of the retirement security rule that it took the 5th Circuit’s 2018 ruling into account, arguing that the 2024 rule was designed to more clearly address when retirement plan rollover advice and annuity sales fall under fiduciary standards.

The DOL Monday continued support the rule.

“When investors get advice from a trusted financial professional about their retirement savings, they expect that advice to be in the customer’s best interest, not the financial professional’s,” a DOL spokesperson wrote in an emailed response. “This rule makes that a reality. The Department continues to believe that this rule is essential to ensuring that retirement investors are protected.”

Other advocacy groups and companies in the financial services sector have supported the 2024 rule in part or whole, including the AARP, CFP Board and the National Association of Plan Advisors.

“The fiduciary rule would be a very good thing for American workers or retirees because it would create the best interest standard for any kind of retirement advice, be it a consultant to a plan, or a consultant to a plan sponsor,” says Jerry Schlichter, founder and managing partner at the law firm Schlichter & Bogard.

In terms of plan sponsors, he says, the rule would give them peace of mind that a plan adviser would not, for instance, be receiving an incentive to recommend a certain fund for the plan menu.

“It would align the best interests of the plan sponsor and the participant perfectly by enabling plan sponsors to have a degree of comfort knowing their fiduciary, or adviser, is acting in their best interest, which is to avoid litigation and serve the interests of the participants,” Schlichter says.

He notes the new rule also extends fiduciary obligation to insurance agents who are advising people on buying retirement income annuities and financial advisers recommending IRA rollovers or other fee-based services.

“This would have codified that [investment advice] in very clear terms and would have protected people who might be told they should be moving assets out of a 401(k) plan into an IRA or into wealth management or some other insurance product,” he says. 

«