Washington – The ERISA Industry Committee (ERIC) filed an amicus brief with the U.S. Supreme Court supporting two petitions for certiorari (requests for review) in FedEx Corp. v. Watt and Bakery, Confectionery, Tobacco Workers and Grain Millers Pension Committee v. Reichert, urging the Court to take the cases and reverse the Sixth Circuit’s previous decision.
Plaintiffs’ lawyers have filed more than three dozen lawsuits since 2018 claiming that life expectancy tables written into pension plans nearly fifty years ago are now “unreasonable.” The Sixth Circuit agreed and added a “reasonableness” requirement, without saying when employers must update their plans or how to do so without lowering benefits.
“Congress told employers to put these assumptions in writing, so employers and workers know what the benefit is,” said Doug Hinson, Executive Director of the ERIC Legal Center.“The Sixth Circuit added a reasonableness test that Congress never wrote. Employers that make changes to satisfy it will necessarily violate Congress’s rule that benefits can’t go down, because what’s good for some participants isn’t always good for all.”
The Sixth Circuit’s decision gives employers no clear way to comply and, left in place, puts more than 20,000 defined benefit plans, with roughly $4.3 trillion in liabilities, at risk of “battle of experts” litigation. Lower courts are divided. As the dissenting judge wrote, it is “hard to see how this standard will benefit anyone besides the attorneys who litigate these cases.”
Read ERIC’s full brief here.
Additional Background:
- Married retirees in traditional pension plans usually receive a joint and survivor annuity, a lifetime benefit that continues to the surviving spouse. Federal law requires it to be the “actuarial equivalent” of the benefit the participant would receive if single, calculated with life expectancy tables for the participant and spouse and an interest rate.
- The plan must spell out these factors, and employers cannot change them if a change would lower a participant’s benefit.
- For other calculations, such as lump sums, Congress required periodic updates, specified when and how they must be made, and created an exception to that rule so benefits can go up or down. Congress has never done this for joint and survivor annuities.
- Updates that raise benefits for the plaintiffs would often lower them for other participants, which the rule against lowering benefits prohibits.