In rapid-fire succession, participants in corporate defined benefit plans at four companies have sued fiduciaries for short-changing them by using out-of-date mortality tables and/or inaccurate methods to calculate certain types of benefits.
The lawsuits' general theme is that the plan executives used improper formulas for calculating alternate benefits, such as joint and survivor annuities or early retirement benefits. These alternate benefits aren't "actuarially equivalent" to each retiree's pension benefit, thus violating plan executives' fiduciary duties under the Employee Retirement Income Security Act, the participants allege.
For some ERISA attorneys who represent plan sponsors, the lawsuits could signal the first volley in a new approach to ERISA litigation.
"This a relatively unexplored area of law," said Nancy Ross, a Chicago-based partner for Mayer Brown LLP, who declined to discuss specific lawsuits and whose firm isn't involved in the cases. "I fear we are entering into expert-laden disputes."
"The similarities in the complaints — and the fact that the same two law firms filed all of the complaints — suggest that additional lawsuits against other large pension plan sponsors may soon follow," said a recent report by The Groom Law Group, Washington. The firm represents one of the defendants, whose name wasn't disclosed.
The lawsuits were filed in early to mid-December against Metropolitan Life Insurance Co., New York; American Airlines Inc., Dallas; PepsiCo Inc., Purchase, N.Y.; and U.S. Bancorp, Minneapolis. All plaintiffs are seeking class-action status.
Companies' representatives declined to comment or didn't respond to a request for comment. Plaintiffs' attorneys Gregory Porter and Mark Boyko, partners at Bailey & Glasser LLP, Washington, didn't respond to a request for comment. Plaintiffs' attorney Robert Izard, a partner at Izard, Kindall & Raabe LLP, West Hartford, Conn., declined to comment.
Ms. Ross and ERISA attorney Marcia Wagner, whose firm doesn't represent companies in these cases, said the lawsuits fall into certain gray areas for DB plan sponsors' responsibilities in calculating certain benefits.
The frequency with which mortality tables must be updated "is an open question," said Ms. Wagner, founder and managing partner of The Wagner Law Group, Boston, who declined to discuss specific cases.
"Even the IRS has not updated its life expectancy tables for purposes of required minimum distributions, based upon a 2000 mortality table, since 2002," Ms. Wagner said.
"Even if a plan's mortality assumptions are outdated and needed to be updated, there is no requirement under either ERISA or the (IRS) code that they be updated to the most current mortality table," Ms. Wagner explained. "For purposes of non-discrimination testing under the code, the IRS permits 1971 mortality tables to be used."