New Litigation Relating to Pension Plan Actuarial Assumptions


ISSUE:The use by Pension Plans of Mortality Tables and Interest Rates from the 1970s and 1980s is being challenged in the new litigation.

Dated actuarial assumptions challenged

Defined benefit pension plans offer a number of alternative forms of benefits such as single life and joint and survivor benefits. Many defined benefit pension plans also offer early retirement benefits. In converting between benefit forms or calculating early retirement benefits, pension plans must use actuarial assumptions, specifically mortality tables and interest rate assumptions. Often these actuarial assumptions are based on mortality tables and interest rates from the 1970s and 1980s and do not reflect the changes in interest rates or the increasing average life spans that have occurred over time. The continued use of interest rates and mortality tables from the 1970s and 1980s is being challenged in four lawsuits as a violation of ERISA and the Internal Revenue Code, both of which require the actuarial assumptions used to convert benefits and calculate early retirement benefits to be reasonable. 

The lawsuits were filed in December 2018 by a single plaintiff's law firm against Metropolitan Life, American Airlines, Pepsi and US Bank Corp. The law firm appears to be soliciting participants in other large pension plans as well. The law firm is able to identify pension plans with older mortality and interest rate assumptions using the public filings of the defined benefit pension plans (IRS Form 5500s). While any individual participant's benefit might be changed only modestly, a class action affecting both prior and future payments could result in substantial additional costs for pension plans as well as significant attorney's fees to the plaintiff's law firm bringing the lawsuits.

Read more Insight & Impact from March 2019:


Many employers have not reconsidered the actuarial assumptions being used to convert between alternative forms of benefit and to calculate early retirement benefits in their defined benefit pension plans for a number of practical and technical reasons. However, in view of the recent litigation, employers with defined benefit pension plans should review the actuarial assumptions being used for these purposes with their attorneys and actuaries to determine whether it is appropriate to revise the assumptions.

For more information on this litigation or managing your defined benefit pension plans, please contact your local Quarles & Brady attorney or these members of our employee benefits group:

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