Insurance company MetLife is facing a class action lawsuit for allegedly failing to pay the alternative benefits available under its defined benefit Metropolitan Life Retirement Plan “in amounts that are actuarially equivalent to the plan’s default benefit as required under [the Employee Retirement Income Security Act], and the terms of the plan itself.”
According to the plaintiffs, MetLife’s pension plan improperly reduced annuity benefits for retirees who received an alternate annuity benefit. The retirees are allegedly receiving benefits that are less than what they are entitled to under ERISA.
By not offering actuarially equivalent pension benefits, “Metropolitan is causing retirees to lose part of their vested retirement benefits,” the lawsuit says.
MetLife sponsors the plan for its eligible employees and the eligible employees of certain participating affiliates. The plan moved from a traditional defined benefit plan to a cash balance benefit plan in 2002, into which all new hires after Dec. 31, 2002, were automatically enrolled. However, employees hired before the end of 2002 had to choose between moving to the cash balance plan, or remaining grandfathered in the pre-existing defined benefit plan.
The plaintiffs say that because mortality rates have improved, people who have retired recently are expected to live longer than those who retired in previous generations. Becauseof this, they said that older morality tables predict that people will die at a faster rate than current mortality tables.
“Using an older mortality table with accelerated death rates decreases the present value of the Alternate Annuity Benefit,” the suit says, “and ultimately, the monthly payment that retirees receive under that Alternate Annuity Benefit.”
The plaintiffs also point out that the mortality table and interest rate together are used to calculate a “conversion factor,” which is used to determine an equivalent benefit between a retiree’s default benefit and the alternate annuity benefit selected by a retiree.
“The issue is whether the mortality and interest rate assumptions together result in a conversion factor that provides for a truly equivalent benefit,” said the lawsuit.
The plaintiffs are seeking an order from the court reforming the plan to conform to ERISA, payment of future benefits in accordance with the reformed plan as required under ERISA, payment of amounts improperly withheld, and other relief.