The Escalating Litigation Involving Actuarial Equivalence on Taft-Hartley Plans: No End in Sight

Shareholder Advocate Summer 2021

July 15, 2021

By Michelle C. Yau, Mary J. Bortscheller, and Julie S. Selesnick

The January 2020 edition of the Shareholder Advocate discussed important fiduciary liability concerns related to the actuarial equivalence requirements of ERISA. This article revisits the subject and provides an overview of court rulings that occurred in the past 18 months.

Actuarial Equivalence Explained

Actuarial equivalence is a computation that means that, all else being equal, all optional forms of benefits offered by a pension plan have the same economic value as each other. Practically speaking, two forms of pension benefits are actuarially equivalent if the present value of all the monthly payments that are likely to be paid to a retiree are equal in value; this calculation is done using two primary actuarial assumptions: an interest rate and a mortality table. The interest rate discounts the value of future payments, while the mortality table provides the anticipated length of time the future payments will be made based on the life expectancy of a person at a given age.

Significantly, ERISA requires the value of all optional forms to be actuarially equivalent to the value of a single life annuity beginning at normal retirement age.1 And whether a plan violates ERISA’s actuarial equivalence rules turn1 Those provisions include ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3), ERISA § 203(a), 29 U.S.C. § 1053(a), ERISA § 205(a) & (d) (1)(B), 29 U.S.C. § 1055(a) & (d)(1)(B) and § 206(a)(3), 29 U.S.C. § 1056(a)(3).s on whether the actuarial assumptions used to calculate all optional forms of benefits are reasonable. On the question of whether a pension plan’s actuarial assumptions are reasonable, courts have considered whether those assumptions have been updated to reflect current trends in mortality and interest rates.

ERISA Litigation Alleging Non-Actuarially Equivalent Benefits

To date, eleven (11) class action lawsuits have been filed asserting ERISA violations for the failure to pay actuarially equivalent pension benefits. To date, all lawsuits in this area have involved corporate pension plans. The vast majority survived motions to dismiss in jurisdictions around the country, including: Torres v. American Airlines, Inc. (N.D. Tex.); Smith v. U.S. Bancorp (D. Minn.); Cruz v. Raytheon Company (D. Mass.); Belknap v. Partners Healthcare System, Inc. (D. Mass.); Duffy v. Anheuser Bush (E.D. Mo.); Berube v. Rockwell Automation, Inc. (E.D. Wis.); Herndon v. Huntington Ingalls Industries, Inc., et al. (E.D. Va.); Masten v. Met Life (S.D.N.Y) and Scott v. AT&T Inc. (N.D. Cal).

Only two courts have granted motions to dismiss: DuBuske v. PepsiCo, Inc. (S.D.N.Y.) and Brown v. UPS (N.D. Ga.). But both dismissals were based upon procedural rather than substantive issues and in the PepsiCo case, the plaintiffs were given leave to replead.

Torres v. American Airlines and the Smith v. U.S. Bancorp were the first two cases where class certification was contested. In both, the proposed classes were not certified. In U.S. Bancorp, shortly thereafter, the parties announced they had reached an undisclosed settlement in principle.

The first major settlement for the failure to pay actuarially equivalent benefits came in February 2021, in Cruz v. Raytheon Company. In this case, the plaintiffs challenged Raytheon’s use of 1971 mortality tables to calculate JSAs. Raytheon has agreed to pay $59.2 million to more than 10,000 participants and beneficiaries. The settlement followed the district court’s denial of the motion to dismiss.


Because continued litigation in this area is likely, ERISA pension plan trustees should review their plan documents and work with their actuary to consider whether the actuarial assumptions used by the plan are reasonable. It is important to document all steps a plan takes to evaluate the reasonableness of the plan’s actuarial assumptions in the event that litigation ever ensues.

As you consider these issues, Cohen Milstein’s ERISA/employee benefits group is available to assist with a review of the actuarial assumptions in your retirement plan(s).

1 Those provisions include ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3), ERISA § 203(a), 29 U.S.C. § 1053(a), ERISA § 205(a) & (d) (1)(B), 29 U.S.C. § 1055(a) & (d)(1)(B) and § 206(a)(3), 29 U.S.C. § 1056(a)(3).