A proposed class action lawsuit claims Anheuser-Busch Companies, LLC (A-B) has unlawfully failed to offer retirement benefits that are actuarially equivalent to a single life annuity, and thereby caused retirees to lose part of their vested benefits.
The lawsuit out of Missouri says that participants in A-B’s retirement plan accrue pension benefits in the form of a single life annuity while they work for the company. Upon retirement, a plan participant, the case explains, can receive his or her pension benefits as a single life annuity—a check once a month for the rest of an individual’s life—or as a joint and survivor annuity (JSA). A joint and survivor annuity provides the participant with a monthly pension payment throughout his or her life and then an equal or reduced annuity to a spouse after the participant’s death. Also available is a certain-and-life annuity (CLA), which provides a plan participant and a beneficiary with benefits for the life of the participant but only for a minimum number of years regardless of how long the individual lives.
The Employee Retirement Income Security Act of 1974 (ERISA) requires that single life, joint and survivor, and certain-and-life annuities be “actuarially equivalent” to a single life annuity, meaning the present value of the payment streams must be equal, the lawsuit says. To calculate the present value of the types of retirement annuities, companies like the defendant apply actuarial assumptions based on a set of mortality tables and interest rates, the case says. These mortality tables and interest rates are then used together to calculate a “conversion factor,” which the lawsuit explains is used to hash out the equivalence between a single life annuity and the other types of optional retirement benefits.
A critical factor within the actuarial equivalence calculation process is mortality rates, which the case points out have generally improved over time and thus cannot be applied wholesale to different generations of retirees. Utilizing an older mortality table to calculate a conversion factor between retirement benefit options, the suit states, “decreases the present value of the option benefit forms” a retiree may receive.
Anheuser-Busch, the lawsuit alleges, has calculated the conversion factor for its retirement benefits options by using the 1984 Unisex Pension (UP-84) mortality table, which was published in 1976 based on data from 1965 through 1970. Therein lies the crux of the lawsuit:
“Defendant’s use of the UP-84 table depresses the present values of the JSAs and CLAs offered under the Plan, resulting in benefits that are not actuarially equivalent to the SLA; rather, benefits under the JSAs and CLAs are materially lower than they would be if the Plan used reasonable, current actuarial assumptions. A-B uses outdated actuarial assumptions to pay benefits under the Plan even though it uses current, updated assumptions to calculate the benefits A-B expects to pay retirees.”
The plaintiff, who worked for the defendant for more than 17 years, was forced to forfeit a portion of his retirement benefits due to A-B’s use of an outdated mortality table, the suit claims.