Kohler Co. and its pension plan have agreed to settle an ERISA lawsuit that accused plan executives of shortchanging retirees’ benefits by using outdated mortality tables in the payment calculations.
The notice of an agreement in principle was filed April 2 in a federal district court in Milwaukee by attorneys representing the defendants and participants in the Kohler Co. Pension Plan. The notice said details would be presented to the court by May 1 in Holloway et al. vs. Kohler Co. et al.
The participants sued in September 2023 saying pension officials used mortality data from the 1960s to calculate benefits for certain participants who retired before 2021. The lawsuit said these benefit calculations failed to achieve an actuarial equivalent of their vested benefits.
Actuarial equivalent is the ERISA requirement that pension plans must follow when calculating benefits other than the standard single-life annuity, a monthly benefit for participants. Plans can offer alternatives such as a joint and survivor annuity, which provides for spouses upon the death of participants, or a certain and life annuity, which guarantees payments for a certain number of years.
To convert a single-life annuity into a joint and survivor annuity, pension plans use a formula based on interest rates and mortality tables. Kohler changed the formula effective Jan. 1, 2021, but it didn't provide retroactive calculations for participants who retired before then, the lawsuit said.
Kohler Co. Pension Plan, Kohler, Wis., had $1.4 billion in assets as of Dec. 31, 2022, according to the latest Form 5500.