February 22, 2021 – Lawsuit Settled for $59 Million
Raytheon has agreed to pay $59.17 million to settle the proposed class action detailed on this page.
According to the plaintiff’s 50-page memo in support of Raytheon’s motion for preliminary settlement approval, filed with the court on February 12, more than 10,000 retired class members are covered by the deal, which is set to increase the individuals’ monthly pension benefits by 40 percent of their damages, less attorneys’ fees, costs, and expenses.
The memo describes the “groundbreaking” settlement as “outstanding in light of the substantial litigation risks in the case.” The deal now awaits preliminary approval from a judge.
The proposed settlement is slated to cover:
“(1) [E]ach participant in a Covered Plan who began receiving a [joint and survivor annuity] from such Covered Plan as of June 27, 2013 or later, and who received a monthly payment of that JSA benefit from such Covered Plan in December 2020 (‘Participant Class Members’); (2) each beneficiary of a participant in a Covered Plan, where such participant began receiving a JSA from such Covered Plan as of June 27, 2013 or later and such beneficiary received a monthly payment of the survivor component of such JSA from such Covered Plan in December 2020 (‘Beneficiary Class Members’); and (3) each surviving spouse of a participant in a Covered Plan, where such participant died on or after June 27, 2013, before the participant began to receive benefits from such Covered Plan, and such surviving spouse received a monthly payment of a [pre-retirement survivor annuity] from such Covered Plan in December 2020 (‘Surviving Spouse Class Members’).”
Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s free weekly newsletter here.
Raytheon Company and its pension plan administrator are among the defendants facing a proposed class action lawsuit over the major defense contractor’s alleged failure to pay benefits under a number of its defined benefit pension plans that are actuarially equivalent to a single life annuity. The lawsuit is centered on Raytheon’s retirement pension plans for hourly and salaried employees, and names as defendants Raytheon’s Non-Bargaining Retirement Plan, Bargaining Retirement Plan, and the company’s Retirement Plan for Engineers and Contractors and Aircraft Credit Employees.
Filed in Massachusetts District Court, the case explains participants in the plans accrue benefits in the form of a single life annuity (SLA)—i.e., a monthly lump sum of money paid upon their retirement and continuing for the rest of a participant’s life—that they can receive in one of several options, such as joint and survivor annuities and certain and life annuities. Raytheon and its plan administrator, the case continues, calculate the amount a plan participant will receive each month by converting the plan’s single life annuity offering to any other type of benefit option using actuarial assumptions, including a mortality table, to predict how long a participant and their beneficiary will live. The Employee Retirement Income Security Act—ERISA—requires pension providers that offer options such as joint and survivor annuities and certain and life annuities to pay benefits that are “actuarially equivalent to a single life annuity,” according to the complaint.
The mortality table used to predict how long a pension plan participant and their beneficiary may live is crucial in that it’s used in concert with interest rates to “discount the value of the expected payments to present value,” the lawsuit says. Together, the mortality table and interest rate are used to calculate a “conversion factor” that is then used to determine the amount of a particular type of retirement benefit that would be equivalent to a company’s single life annuity.
“For example, a Qualified Annuity with a ‘conversion factor’ of .90 means participants receive 90% of the monthly retirement benefit they would have received if they had selected the SLA. ERISA requires that these Qualified Annuities be ‘actuarially equivalent’ to an SLA, meaning that the present value of the payment streams must be equal.”
Mortality rates have improved over time, however, and using an older mortality table, as well as using lower interest rates that do not reflect modern mortality rates, will decrease the present value of retirement annuities, the case says. Raytheon and its co-defendants, the lawsuit alleges, use “unreasonable and improper” actuarial assumptions to calculate the company’s retirement annuity offerings, which throws off conversion factors so that they fail to generate actuarially equivalent benefits as required by law. According to the complaint, Raytheon uses mortality assumptions from 1971 to calculate pension benefits, thereby depressing the present value of proposed class members’ benefits.
Per the plaintiff, the lawsuit says the man worked for the defense contractor for more than 32 years and is a participant in the aforementioned hourly employees’ retirement plan. The plaintiff claims Raytheon’s application of an unreasonable conversion factor to his benefits payments has caused him to receive $57 less per month, reflecting a more than $10,700 depression in his retirement benefits.