Plan Sponsor Prevails on Summary Judgment in Case Challenging Actuarial Assumptions

Key Takeaway: A defined benefit plan sponsor recently prevailed on summary judgment against a claim that it provided joint and survivor annuities that were not actuarially equivalent to single-life annuities. The Court’s ruling read ERISA’s provisions narrowly and therefore may provide some support to litigants who wish courts to do the same in other contexts.

On March 4, 2022, the U.S. District Court for the District of Massachusetts granted summary judgment for defendant Partners Healthcare Systems, Inc. in connection with claims regarding a defined benefit plan sponsored by Partners. The plaintiff, a participant in the plan, retired early and elected to receive his benefits in the form of a joint and survivor annuity rather than a single-life annuity. ERISA requires that a joint and survivor annuity paid beginning at an early retirement age must be the “actuarial equivalent” of a single-life annuity paid beginning at a normal retirement age. The plaintiff alleged that his benefit was not the actuarial equivalent of such a single-life annuity because Partners calculated it using an outdated interest rate and mortality table. On January 24, 2020, the district court granted Partners’ motion to dismiss in part. The plaintiff later amended his complaint, Partners moved to dismiss again, and the Court converted that motion into a motion for summary judgment after asking the parties to submit expert evidence on the established meaning of the term “actuarial equivalence” given that the term was not defined in the statute.
The district court ruled that the plaintiff’s claims failed because, although ERISA requires that benefits be actuarially equivalent to one another, it does not require that the actuarial assumptions used to calculate equivalency be reasonable ones. It reasoned that the relevant ERISA provision does not use the term “reasonable” and that such an omission should be assumed to be deliberate where other ERISA provisions do use that term. Further, it found persuasive that the plan’s governing plan document required the use of the challenged interest rate and mortality table, and that the plaintiff’s experts had testified that it was reasonable to follow plan terms when making actuarial calculations. Although the district court anticipated that its ruling could be called “irrational or unfair,” it wrote in language that could apply beyond this fact pattern that ERISA plans “are private arrangements, not part of a government social welfare program,” and “not generally required to provide protection against various forms of economic or social change.” This is one of several lawsuits filed regarding the provision of ERISA requiring that benefits under a defined benefit plan be actuarially equivalent to single-life annuities paid at normal retirement age, and courts have generally split on what that provision requires.
The case is Belknap v. Partners Healthcare System, Inc., No. 19-11437, in the United States District Court for the District of Massachusetts, and the decision is available here. The plaintiff is appealing the order to the First Circuit Court of Appeals.