In another courtroom battle between the Department of Labor and the retirement industry, three big employer groups are supporting Southern Company Services, which has been accused of short-changing payments to married retirees by using outdated mortality data in calculating benefits.
The industry members — American Benefits Council, ERISA Industry Committee and the Committee on Investment of Employee Benefit Assets Inc. — filed an amicus brief Feb. 3 in the 11th U.S. Circuit Court of Appeals, Atlanta, saying the company acted properly in calculating benefits. The DOL filed an amicus brief in December, saying the company and its fiduciaries violated ERISA.
The key issue in the Southern Company Services case — and similar lawsuits — is how sponsors use mortality tables and interest rates to prepare payment formulas for married retirees compared to formulas for individual retirees.
Married retirees receive a joint and survivor annuity, which pays an annuity to the participant for the participant's life and for the life of the participant's surviving spouse.
The Southern Company Services retirees sued in September 2022 — they later amended it — saying the company used mortality tables that were 40 to 70 years out of date. Because life expectancy has increased over the decades, they said Southern Company Services should have used more modern data tables.
The retirees argued — and DOL agreed — that the company's use of old mortality table data failed to produce payments for married retirees that should be "actuarially equivalent" to calculations for individual retirees.
Plaintiffs also noted that the company uses updated mortality tables for several calculations including SEC disclosures, lump sum payments and ERISA's minimum fund requirements.
The pensioners lost their initial lawsuit July 30 when a U.S. District Court Judge in Atlanta said the retirees weren't harmed by the company's actions and that the company didn't violate ERISA in the case of Drummond et al. vs. Southern Company Services et al. The plaintiffs appealed.
The retirees "ask the court to do away with ERISA's bedrock principle and carefully constructed scheme built upon it over more than five decades," said the Feb. 3 amicus brief from the three groups.
The bedrock principle is that ERISA "would create a regulatory environment conducive to employer choice regarding plan terms," they wrote. "Overthrowing the regulatory regime contemplated by Congress would be a radical step with radical consequences."
Some courts, including the Georgia federal court, have dismissed actuarial equivalence lawsuits, saying there is nothing in ERISA that requires sponsors to use "reasonable" or "current" actuarial assumptions to calculate benefits. Other courts have denied motions to dismiss, leading in some instances to settlements.
The Georgia court said Congress did not specifically include a standard of reasonableness and did not include specific actuarial factors in the ERISA section covering pensions.
This court correctly rejected the retirees' claims "to fashion unwritten judge-made standards for actuarial assumptions where the Congress elected not to specify any," the employer group's amicus brief said.
The DOL's amicus brief said the District Court judge didn't consider industry definitions of "actuarial equivalence" or the Treasury Department's definition of a qualified joint and survivor annuity, which says, in part, that equivalence "may be determined on the basis of consistently applied reasonable actuarial factors."
The DOL noted that ERISA "does not define what it means" for a joint and survivor annuity to be actuarially equivalent of a single life annuity. However, those terms "have a plain meaning that necessarily require the use of reasonable actuarial assumptions,” the DOL wrote.
The Southern Company Pension Plan, Atlanta, had assets of $15.6 billion as of Dec. 31, 2023, according to the latest Form 5500.