A federal court judge in New York rejected a petition by Metropolitan Life Insurance Co. to dismiss a lawsuit against the company and its fiduciaries by retirees who contend they were shortchanged in their pensions.
The retirees argued that MetLife used outdated mortality tables in its defined benefit plan to calculate alternate annuity benefits — the amount paid to participants who retire before the traditional retirement age, usually 65.
The lawsuit, filed in December 2018, listed several examples of alternate benefits such as joint and survivor annuities, first-to-die annuities, single-life annuities and qualified pre-retirement survivor annuities.
"At this stage of proceedings, the court finds it plausible that the plan's use of decades-old mortality tables is not a 'reasonable' actuarial assumptions in light of the ready availability of updated alternatives," U.S. District Court Judge Ronnie Abrams wrote in a ruling Monday.
"The court concludes that benefit plans must use actuarial assumptions that are reasonable in order to qualify as actuarially equivalent within the meaning of the Act," the judge said. "The court thus finds that plaintiffs have plausibly alleged the plan's use of those mortality tables is unreasonable in this context."
The plaintiffs said MetLife's use of mortality tables from 1971 and 1983 violated an ERISA rule that alternate benefits had to be "actuarially equivalent" to benefits, as if participants had reached the traditional retirement age, according to the judge's ruling.
The plaintiffs pointed out that MetLife uses up-to-date actuarial assumptions when calculating pension costs in the company's audited financial statements, according to the judge's ruling in the case of Masten and McAlister vs. Metropolitan Life Insurance Co. et al. The plaintiffs are seeking class action status.
Estimated fair value of MetLife's U.S. pension assets was $10.7 billion as of Dec. 31, 2020, according to the company's latest 10-K statement.