A federal judge in Durham, N.C., has rebuffed a request by Duke University to dismiss a lawsuit by a defined benefit plan retiree, Joy G. Franklin, who claimed the university is shortchanging certain retirees by using outdated mortality table data in its calculations.
The lawsuit centers on the calculations used for married retirees who are subject to a different pension payment calculation than an individual who is covered by a single life annuity.
The plaintiff’s lawsuit said a pension for married retirees — a joint and survivor annuity or a pre-retirement survivor annuity — must be “actuarially equivalent” to a single life annuity, according to ERISA. The calculations for these benefit payments require formulas — based on mortality tables and interest rates — to achieve actuarial equivalence. Because the university used out-of-date mortality tables, Franklin argued that she and other retirees were underpaid.
“Ms. Franklin plausibly alleges that the defendants are not calculating her benefits in compliance with the statutory requirement for actuarial equivalence,” U.S. District Judge Catherine C. Eagles wrote on April 23.
“Ms. Franklin has alleged specific facts to support her claim that she received an accrued benefit that was not the actuarial equivalent of an SLA (single life annuity) and she has plausibly stated a claim” under ERISA,” the judge wrote. “Ms. Franklin has alleged facts sufficient to draw the inference that the defendants used outdated formulas that underestimated the value of her accrued benefits and constituted an unreasonable actuarial conversion.”
Franklin sued in September 2023. The university initially asked the judge to dismiss the case, arguing that the dispute was subject to arbitration. The judge rejected that argument in February 2024.
The university changed its pension calculation formulas on July 1, 2023, but participants who started receiving benefits before that date were forced to receive lower payments caused by older mortality tables, the lawsuit said. Franklin worked 18 years for the university and began receiving pension benefits in 2018.
The Employees' Retirement Plan of Duke University, Durham, N.C., had $2.47 billion in assets as of Dec. 31, 2022, according to the latest Form 5500.
