Huntington Ingalls Industries, Inc. and the administrative committee of the shipbuilding company’s employee pension plan find themselves on the receiving end of a proposed class action that claims they failed to provide alternative retirement benefits of equal value to single life annuities.
The case explains that the defendants, as part of their pension plan, offer employees a single life annuity (SLA)—monthly payments that begin at retirement—as well as other benefit options, including joint and survivor annuities, which provide spouses with continued payments after a retiree’s death. Under the Employee Retirement Income Security Act (ERISA), non-SLA options must be of equal value to SLA benefits, the suit says. The defendants, however, allegedly underpay retirees who elect non-SLA benefits by using outdated mortality rates from 1971 to calculate monthly payments. From the complaint:
“Using the 1971 GAM [Group Annuity Mortality] table, which is based on data collected roughly 50 ago [sic], depresses the present value of Non-SLA Annuities, resulting in monthly payments that are materially lower than they would be if Defendants used reasonable, current actuarial assumptions.”
The reason for this, the case says, is that an increasing life expectancy has caused mortality rates to continuously improve over time. According to the lawsuit, using outdated tables with higher mortality rates “can have dramatic effects” on the value of annuity payments and cause retirees to receive lower monthly payments than they would if the defendants had based their calculations on current data.