Actuarial Equivalence Litigation Presents New Challenge For Defined Benefit Plan Sponsors

In late 2018, class action counsel began filing lawsuits against large defined benefit plan sponsors alleging a novel cause of action—that the plans were using unreasonable actuarial assumptions to convert participant benefits to alternate forms of payment. Since then, the litigation has expanded to affect plans sponsored by American Airlines, Anheuser-Busch, AT&T, Corteva, Dow, Dupont, MetLife, PepsiCo, Raytheon, and U.S. Bancorp.

The cases generally allege that plan sponsors are failing to fulfill their duties under their plans by failing to provide actuarially equivalent benefits to participants. To date, the complaints have taken one of two forms:

• Plan sponsors are using unreasonable early retirement factors, which result in inappropriate reductions of benefits for early retirees.