A former employee of Howard University has sued the Washington-based institution and its fiduciaries alleging ERISA violations due to an "unreasonable" formula for calculating pension payments.
The lawsuit accused the defendants of using an outdated mortality table to calculate the benefits, according to the complaint filed Aug. 17 in the U.S. District Court in Washington, D.C. Combining outdated mortality table – data from the 1960s and 1970s – with an inadequate interest rate assumption led to the university using a payment formula that shortchanged the plaintiff and others, said the complaint in Whetstone vs. Howard University et al.
The complaint alleged that the Howard University formula failed to provide an "actuarial equivalent" between the standard employee's pension called a single life annuity, or SLA, and alternative pensions called a joint and survivor annuity or qualified pre-retirement survivor annuity, which covers an employee's spouse.
"The interest rate and mortality table work together to generate a 'conversion factor' that is applied to a participant's SLA," said the lawsuit, adding that the plaintiff chose a joint and survivor annuity.
"All else being equal, using an antiquated mortality table to calculate a conversion factor decreases the present value of an optional benefit form and, in turn, the monthly amount retirees receive," said the lawsuit, which is seeking class-action status.
If an alternative pension payment isn't actuarially equivalent to a single life annuity, it violates the illegal forfeiture provision of ERISA, the lawsuit said.
A university representative did not respond to a request for comment.
The Howard University Employees' Retirement Plan, Washington, had assets of $618.5 million as of Dec. 31, 2021, according to the latest Form 5500.