The Department of Labor has supported IBM retirees, asking an appeals court to overturn a lower court’s rejection of the retirees’ lawsuit that the company shortchanged pension benefit payments by using outdated mortality data to calculate their benefits.
The DOL rarely files amicus briefs at the lower-court level, but this document, filed Aug. 23, said a federal judge not only misinterpreted federal law but also ignored a 9-0 Supreme Court ruling that governs the timetable for plaintiffs’ filing ERISA lawsuits.
The Supreme Court ruling set a standard for retirement plans in which the mere sending of information to participants isn’t sufficient in a legal dispute, and the DOL’s amicus brief outlined sponsors’ duties beyond the specifics of the IBM case.
The Supreme Court placed an onus on sponsors — in defined benefit and defined contribution plans — to show participants had “actual knowledge” of the information provided to them. If participants had actual knowledge, they have three years to sue under ERISA. If they didn’t have actual knowledge, they have six years to sue.
The IBM plaintiffs sued in June 2022, saying the company pension plan payments for married retirees weren’t actuarially equivalent to payments for individual retirees, thus violating ERISA. The reason: IBM used a mortality table containing data from 1965 to 1970 which shortchanged married retirees’ payments, the retirees said.
In April 2024, U.S. District Judge Nelson S. Roman in White Plains, N.Y., dismissed the complaint, saying plaintiffs waited too long to sue in Knight et al. vs. International Business Machines Corp. et al. He dismissed the lawsuit with prejudice, meaning the plaintiffs cannot refile in his court.
Roman wrote that plaintiffs should have sued within two years of receiving pension-calculations information based on the terms of the pension plan document. The judge also wrote that the plaintiffs also missed an ERISA deadline, which says fiduciary-duty claims must be filed within three years of plaintiffs having “actual knowledge.”
The relevant plan document governing both the statutory and ERISA allegations was June 1, 2016, Roman wrote.
The retirees appealed to the 2nd U.S. Circuit Court of Appeals, New York, supported by the DOL, which criticized Roman’s reasoning.
The DOL cited a 2020 U.S. Supreme Court ruling describing when the clock starts on filing a lawsuit when a plaintiff has “actual knowledge” of an alleged ERISA violation.
“To have ‘actual knowledge’ of a piece of information, one must in fact be aware of it,” said the Supreme Court in Intel Corp. Investment Policy Committee vs. Sulyma. Actual knowledge “requires more than evidence of disclosure alone.”
(The plaintiff in the Supreme Court case, Christopher Sulyma, was a participant in an Intel 401(k) plan who complained that he didn’t understand the cost and performance of alternative investments in the plan.)
In the IBM case, the DOL said that just because plaintiffs received “lengthy pension projection statements disclosing the mortality table,” that wasn’t enough to establish actual knowledge.
Although the District Court judge had written that these statements “disclosed all the facts relevant to their claim of fiduciary breach,” this opinion “flies in the face of Sulyma,” the DOL wrote.
“Contrary to Sulyma’s instruction, the district court never evaluated when plaintiffs ‘in fact’ became aware of defendants’ use” of the mortality table used in calculating their benefits, the DOL wrote.
“The district court did not even cite Sulyma, let alone attempt to reconcile its decision with it,” the DOL wrote.
The DOL pointed out that the information IBM sent to participants was complex: The mortality table appeared only once in the IBM document, which contained multiple pages of projected benefits, plus a section of single-spaced “often technical text” about calculations.
“It is the height of speculation that any plaintiff, after receiving their (pension) statement, continued reading past the key information to find the technical notes, and understood their practical implications by referencing an earlier definition,” the DOL wrote.
“At this stage of litigation, and on the record before the court, it is impossible to ascertain whether any plaintiff had actual knowledge of the actuarial assumptions defendants used to calculate their benefits at the time plaintiffs received their pension projection statements,” the DOL concluded.
IBM Personal Pension Plan, Armonk, N.Y., had $25.5 billion in assets as of Dec. 31, 2022, according to the latest Form 5500.
