Raytheon Co. agreed to pay $59.2 million to settle an ERISA complaint filed by a retiree who accused the company and fiduciaries of using an outdated mortality table to improperly calculate retirement benefits.
The proposed settlement document, which requires court approval, was filed Feb. 12 in a U.S. District Court in Boston.
"This litigation has been pending for a year-and-a-half and would be much lengthier and more expensive if it were to proceed to full discovery, a contested motion for class certification, trial and possible appeals," said the document filed by the plaintiff in the class-action case of Johnny Cruz vs. Raytheon Co. et al.
"If the settlement is approved, the class will begin receiving higher monthly pension payments now, instead of years from now if the case were ultimately successful at trial," the document said.
The defendants didn't admit any liability, the document said.
Mr. Cruz sued in June 2019 alleging that Raytheon used a 1971 mortality table to calculate annuities for pension plan participants.
The 1971 mortality table caused Mr. Cruz and other retirees "to unknowingly lose part of their vested benefits and forfeit those benefits in violation of ERISA's anti-forfeiture rule," the original complaint said.
Mr. Cruz retired in 2015 at age 55 and is a participant in the Raytheon Co. Pension Plan for Hourly Employees, Waltham, Mass. The plan is a defendant in the lawsuit as are four other Raytheon pension plans.
"Plaintiff contends that Raytheon's calculation formulas shortchanged retirees and beneficiaries receiving JSAs and PSAs and that retiree and beneficiary monthly pension checks should be higher," said the preliminary settlement document, referring to a joint and survivor annuity and a pre-retirement survivor annuity.
ERISA "requires that pension benefits in the form of a Joint and Survivor Annuity, which provides benefits for the life of the participant and beneficiary, be 'actuarially equivalent' to the retiree's single-life annuity," the settlement document said.
ERISA also requires that "pension benefits in the form of a pre-retirement survivor annuity, which provides survivor benefits to a plan participant's beneficiary, equal the survivorship portion of a hypothetical JSA that is "actuarially equivalent" to the single-life annuity the participant could have selected had the participant lived," the document said.
The parties began negotiating in September and reached an initial agreement in November in which "class members would recover 40% of total calculated benefit shortfall both for past and future benefit payments, less any amounts awarded by the court for attorneys' fees and expenses," the document said.
