The Department of Labor has joined retirees of Southern Company Services Inc., asking a federal appeals court to overturn a lower court's dismissal of allegations that the sponsor short-changed pension payments by using outdated mortality tables.
Plaintiffs argue that using outdated mortality tables distorts payment because people are living longer, and DOL says the reduced pension payments represent an illegal forfeiture of benefits.
The DOL filed an amicus brief filed Dec. 4 in the 11th U.S. Circuit Court of Appeals, Atlanta, seeking reversal of an Atlanta U.S. District Court judge's July 30 ruling. The judge rejected arguments that married retirees were harmed and ERISA was violated by the sponsor's action.
The DOL addressed specific facts of the case, but it also highlighted what it says is ERISA's protection of the rights of married retirees in a legal arena filled with conflicting federal court rulings. Those conflicting rulings differ over whether calculations for married retirees' pensions are "actuarially equivalent" to calculations for individual retirees.
Some courts, like 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.
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.
Other courts have rejected motions to dismiss, allowing cases to go to trial, while some lawsuits have been settled. Recent settlements include Citgo Petroleum for $10 million in October; Kohler for $2.45 million in June; Sprint for $3.5 million in December 2023 and Rockwell Automation for $900,000 in November 2023.
The key issue in the Southern case and similar lawsuits is how sponsors use mortality tables and interest rates to prepare payment formulas for married retirees compared to a single life annuity 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 retirees sued in September 2022 — they later amended it — seeking class action status. They said Southern used mortality tables that were 40 to 70 years out of date in the case of William Drummond et al vs. Southern Company Services Inc. et al.
The pension plan "assumes many participants like Mr. Drummond are likely to die at the same rate as people born in the 1800s," the lawsuit said.
Plaintiffs also argued that the company hasn't been consistent because it uses updated mortality tables for several calculations including SEC disclosures, lump sum payments and ERISA's minimum fund requirements.
U.S. District Court Judge Steve C. Jones dismissed the lawsuit in July 2024. "Congress knew how to require that plans require actuarial equivalence using reasonable assumptions of calculate benefits using specific assumptions," the judge wrote.
"None of the provisions at issue here provide that plans must determine actuarial equivalence using assumptions that are reasonable or using specific interest rates or mortality tables," the judge wrote.
The retirees appealed, and the DOL subsequently filed its amicus brief.
The DOL criticized the judge for failing to 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 argued "there is no dispute" that ERISA requires a qualified joint and survivor annuity to be the actuarial equivalent of a single life annuity.
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.
Using "improper" actuarial assumptions to calculate benefits for married retirees represents an illegal forfeiture of the retirees' assets, 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.
The Georgia case is the second time this year that DOL has supported married retirees’ effort to overturn an adverse mortality-table ruling.
In August, the DOL filed an amicus brief in Knight et al. vs. International Business Machines Corp. et al in which plaintiffs made similar arguments about pension calculations for married retirees. They sued in June 2022, but a U.S. District Court judge in White Plains, N.Y. dismissed the complaint saying plaintiffs waited too long to sue.
The plaintiffs appealed to the 2nd U.S. Circuit Court of Appeals, which is pending.
The DOL amicus brief said the district court improperly dismissed the appeal because it ignored a 9-0 Supreme Court ruling governing the timetable for filing ERISA lawsuits. DOL alleged that IBM provided insufficient information to pension plan participants, which contributed to the district court's inaccurate timetable for accepting the lawsuit.
