Recently, a number of lawsuits have been filed alleging that private pension plans have been calculating pension payments based on outdated mortality tables. Mortality tables estimate a person’s likelihood of dying within the year.
Is this a widespread problem?
Yes. It’s no secret that thousands of corporate pension plans use outdated mortality tables in order to determine the value of pension benefits they are required to pay. Not surprisingly, these decades-old actuarial assumptions severely underestimate the life expectancies of recently retired workers. This results in lower payments to retirees.
For example, a recently filed class action lawsuit alleges that MetLife has been using men’s mortality tables that date back to 1971. Another lawsuit alleges that a large Massachusetts healthcare system has been using life expectancy tables dating back to 1951. And, in 2021, a similar case against Huntington Ingalls Industries settled for $2.8 million.
How do outdated mortality tables affect my pension?
Pension payments and annuities calculated using out-of-date mortality tables are generally worth less than benefits calculated on the basis of updated mortality data. Using old tables reduces the present value of benefits because these tables predict that people will die at a faster rate than the new tables do.
Is using outdated mortality tables illegal?
The class action lawsuits allege that using outdated actuarial assumptions results in lower payments to retired employees, in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Moreover, the fact that these lawsuits have been filed puts fiduciaries of company pension plans on notice that the way they have been calculating retirement benefits could be flawed. Therefore, a prudent fiduciary should carefully examine whether their plan has been using antiquated mortality tables to calculate participants’ pension benefits. Failing to do so could result in an actionable breach of their fiduciary duties.
Is there a risk that my pension benefits could be reduced?
No. The Internal Revenue Code bars any changes to actuarial assumptions that result in a reduction of pension benefits. So, any update can only increase the amount of a retiree’s pension benefits.
What should you do if you suspect that your pension plan used outdated tables?
Edelson Lechtzin LLP is a national class action law firm with offices in Pennsylvania and California. In addition to cases involving employee benefits plans, our lawyers focus on class and collective litigation in cases alleging violations of the federal antitrust laws, securities and investment fraud, wage theft and unpaid overtime, consumer fraud, and dangerous and defective drugs and medical devices.