Massachusetts court denies ERISA request

On March 4, 2022, the District Court for the District of Massachusetts dismissed, per Fed. A. Civil. P. 56, ERISA claims filed by a former employee who took early retirement at age 62 and is receiving retirement benefits in the form of a joint and survivor annuity. Belknap v. Partners Healthcare Sys., no. 19-11437-FDS, 2022 US Dist. LEXIS 38381 (D. Mass. March 4, 2022).

The plaintiff claimed that the defendants violated ERISA by using allegedly unreasonable and outdated actuarial assumptions to determine the value of his joint and survivor annuity, resulting in a lower monthly payment. Under ERISA, a joint and survivor annuity paid on early retirement must be the “actuarial equivalent” of a single life annuity paid from normal retirement age, which in this case was 65. under the defendants’ benefits plan. In sum, the plaintiff alleged that his actual joint and survivor pension at age 62 was not actuarially equivalent to the single life pension he would have received if he had retired at age 65.

After two rounds of irrevocable motions and amendments to the complaint, the parties engaged in a period of expert discovery followed by the defendants who requested a third time to dismiss plaintiff’s claims. The court found that the plaintiff had sufficiently alleged that a favorable decision would result in an increase in his benefits and denied the defendants’ 12(b)(1) motion on these grounds. Because both parties presented expert evidence regarding the meaning of “actuarial equivalence,” the court converted defendants’ 12(b)(6) motion to a motion for summary judgment.

The court summarized the central issue regarding “actuarial equivalence” as one that required statutory interpretation to determine whether ERISA imposes a reasonableness requirement for “actuarial equivalence” in this context. The court found that ERISA did not. First, in analyzing the meaning of “actuarial equivalent” under 29 USC § 1054(c)(3), the court rejected the addition of a reasonableness requirement, noting that the law, prima facie , does not define “actuarial equivalence” or require “reasonable” actuarial assumptions. The court found that this omission was material because ERISA does it elsewhere, such as providing mortality assumptions and interest rates to convert annuities into lump sum payments.

Second, after reviewing the regulations and case law, the Court did not interpret them as requiring actuarial equivalence calculations based on reasonable assumptions. The court noted that the settlements were for lump sum benefits or plan changes, which did not apply here. The court determined that many of the cases cited by the plaintiff involved lump sum benefits, or that they lacked compelling reasoning to add a requirement of reasonableness to the statute.

Third, the court analyzed how “actuarial equivalence” is treated by actuaries in practice when calculating benefits to be paid to see if it was a term of the art in the field. The court found that the undisputed industry practice is to consult plan documents to determine which actuarial assumptions to use. Indeed, the plaintiff’s own experts admitted as much. In that case, the defendants’ plan was the only relevant place where “actuarial equivalence” was defined, and the parties agreed that the defendants followed the terms of the plan.

Finally, the court concluded that this was not an absurd interpretation of ERISA, noting that pension plans “are generally not required to provide protection against various forms of economic or social change.” For example, nothing in ERISA mandates cost-of-living adjustments, although over time inflation can significantly erode the value of pension benefits. The court had also noted earlier that there may be limits to the actuarial factors a plan can use when it is adopted or amended.

© 2022 Jackson LewisNational Law Review, Volume XII, Number 73

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