Masten v. Metro. Life Ins. Co.

543 F.Supp.3d 25

William MASTEN and Catherine McAlister, on behalf of themselves and all others similarly situated, Plaintiffs,

v.METROPOLITAN LIFE INSURANCE COMPANY, the Metropolitan Life Insurance Company Employee Benefits Committee, and John/Jane Does 1-20, Defendants.

No. 18-CV-11229 (RA)

United States District Court, S.D. New York.

Signed June 14, 2021

Douglas Patrick Needham, Mark Peter Kindall, Robert A. Izard, Seth R. Klein, Christopher Michael Barrett, Izard Kindall & Raabe LLP, West Hartford, CT, Gregory Y. Porter, Bailey & Glasser LLP, Washington, DC, Mark George Boyko, Bailey & Glasser, Webster Groves, MO, for Plaintiffs.

Myron D. Rumeld, Russell Laurence Hirschhorn, Proskauer Rose LLP, New York, NY, for Defendants Metropolitan Life Insurance Company, Metropolitan Life Insurance Company Employee Benefits Committee.

OPINION AND ORDER

RONNIE ABRAMS, United States District Judge:

Plaintiffs William Masten and Catherine McAlister bring this putative class action against Defendants Metropolitan Life Insurance Company, the Metropolitan Life Insurance Company Employee Benefits Committee, and the individual members of the Committee, alleging that their retirement plan's use of outdated mortality tables to calculate alternative benefits violates the requirements of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA" or the "Act"). Now before the Court is Defendants’ motion to dismiss the complaint. For the reasons that follow, that motion is granted in part and denied in part.

BACKGROUND

Plaintiffs William Masten and Catherine McAlister, retirees of Defendant Metropolitan Life Insurance Company ("MetLife") and its affiliates, are participants in the Metropolitan Life Retirement Plan (the "Plan"). They claim that the Plan's use of mortality tables from 1971 and 1983 to convert default retirement benefits into the alternative benefits that they opted to receive constitute unreasonable actuarial assumptions, in violation of the statutory requirement that alternative benefits be "actuarially equivalent." Before discussing the factual background that bears on the legality of the alternative benefits offered by the Plan, the Court reviews the statutory framework in which the issue arises.

I. ERISA Statutory Scheme

Congress has proclaimed that the "policy" of ERISA is to protect "the interests of participants in employee benefit plans and their beneficiaries, ... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. § 1001(b). Put differently, ERISA was "enacted to restrict employers’ and employees’ freedom of contract when bargaining over pensions." Esden v. Bank of Bos. , 229 F.3d 154, 172 (2d Cir. 2000). As relevant here, employee benefit plans must meet ERISA's non-forfeitability requirements, which are "minimum vesting standards mandating that ‘[e]ach pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age.’ " Laurent v. PricewaterhouseCoopers LLP , 794 F.3d 272, 274 (2d Cir. 2015) (quoting 29 U.S.C. § 1053(a) ). A defined-benefit plan satisfies these requirements if "an employee who has completed at least 5 years of service has a nonforfeitable right to 100 percent of the employee's accrued benefit derived from employer contributions." 29 U.S.C. § 1053(a)(2)(A)(ii). ERISA defines "accrued benefit" as "the individual's accrued benefit determined under the plan and ... expressed in the form of an annual benefit commencing at normal retirement age." Id. § 1002(23)(A); see Laurent , 794 F.3d at 274 ("In plain English, this means that an employee's accrued benefit is the amount she would receive annually as an annuity after she reaches normal retirement age.").

ERISA further requires that defined-benefit plans provide "a qualified joint and survivor annuity" and a "qualified optional survivor annuity" to qualified participants and beneficiaries. Id. § 1055(d)(1). Both forms of alternative benefits must be "the actuarial equivalent of a single annuity for the life of the participant." Id. §§ 1055(d)(1)(B), 1055(d)(2)(A)(ii). In a single life annuity (or "SLA"), a pensioner receives a defined-benefit payment for the duration of her own life. See, e.g., Spirt v. Teachers. Ins. & Annuity Ass'n , 691 F.2d 1054, 1058 n.1 (2d Cir. 1982). The Act does not define "actuarial equivalent." Implementing regulations promulgated by the United States Department of Treasury ("Treasury") direct employers to use "reasonable actuarial factors" to determine the actuarial equivalence of qualified joint and survivor annuities. See 26 C.F.R. § 1.401(a)-11(b)(2) ("A qualified joint and survivor annuity must be at least the actuarial equivalent of the normal form of life annuity or, if greater, of any optional form of life annuity offered under the plan. Equivalence may be determined, on the basis of consistently applied reasonable actuarial factors, for each participant or for all participants or reasonable groupings of participants ...").

ERISA authorizes private rights of action brought by participants or beneficiaries to "(A) enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3).

II. Factual Background¹

The Plan, which Plaintiffs allege qualifies as a defined-benefit plan within the meaning of the Act, "has several formulae for how participants earn retirement benefits." Dkt. 42, Corrected Amended Complaint, ("Complaint") ¶¶ 2, 35. Under the Plan's traditional formula, participants earn a retirement benefit in the form of an SLA based on their final average compensation and years of service. Id. The Plan also offers alternative benefit forms, "including ‘certain and life annuities’ which provide ... benefits for at least a specified minimum period, e.g. 5 years, regardless of how long the participant lives; first-to-die annuities; and ‘joint and survivor annuities’ ... (collectively, ‘Non-SLA Annuities’)." Id. ¶ 2. With respect to these Non-SLA Annuities, the Plan applies actuarial assumptions based on a set of mortality tables and interest rates to calculate a benefit amount that purports to be actuarially equivalent to the accrued SLA benefit. Id. ¶ 3. In other words, the conversion factor, according to which an SLA is converted into another form, has two main components: an interest rate and a mortality table, which is "a series of rates which predict how many people at a given age will die before attaining the next higher age." Id. ¶¶ 64, 67.

Until 2003, Plan participants earned benefits under the "Traditional Part," according to which the retirement benefit was calculated as "percentage of their compensation multiplied by how many years they worked for [MetLife]." Id. ¶ 37. Masten accrued a benefit under the Traditional Part but he and his wife receive "a joint and survivor retirement annuity." Id. ¶ 13. Elsewhere, the Compliant asserts that Masten selected a "30% First-to-Die Annuity," which pays $2,327 per month until the earlier of his or his wife's death, and then $698 per month thereafter. Id. ¶ 96. Plaintiffs allege that the "Traditional Part's ‘normal retirement benefit’ is an SLA." Id. ¶ 38. The Traditional Part defines the term "accrued benefit" as a 12-year life and certain annuity (a "12YCLA"), a benefit that the Plan provides is the "actuarial equivalent" of the SLA that the participant earned. Id. ¶ 39. According to the Plan Document, each of the alternative forms of benefit available to participants is the actuarial equivalent of the participant's accrued benefit, i.e. , the 12YCLA. Id. ¶ 41. For the Traditional Part, Defendants calculate the value of the Non-SLA Annuities "using the 1971 Group Annuity Mortality Table for Males (the ‘1971 GAM Table’), set back one year for participants and set back five years for beneficiaries and a 6% interest rate." Id. ¶ 6.

The Plan's "NEF" Part—formerly the pension plan for employees of New England Financial—was merged into the Plan in December 31, 2000 following MetLife's purchase of that entity. Id. ¶ 51. McAlister and her husband receive "separate joint and survivor retirement annuities under the Traditional Part and the NEF Part." Id. ¶ 14. Under the NEF Part, participants earn a retirement benefit in the form of an SLA. Id. ¶ 52. "For the NEF Part, Defendants use the 1983 Group Annuity Table (‘1983 GAM Table’) for males set-back one year and a 5% interest rate" to calculate the conversion factor from SLA to Non-SLA Annuities. Id. ¶ 6.

Plaintiffs allege that "the holding company that owns [MetLife] and its affiliates[ ] uses up-to-date actuarial assumptions when calculating pension plan costs in its audited financial statements that it prepares with the assistance of an independent auditor," in accordance with the generally accepted accounting principle that mortality assumptions represent "the ‘best estimate’ for the assumption as of the current measurement date." Id. ¶ 85. For example, the Society of Actuaries published a mortality table in 2014 to "account for changes to a population's mortality experience." Id. ¶ 68. As of 2018, Treasury has used that 2014 mortality table. Id. ¶ 71.

III. Class Action Allegations

Plaintiffs bring this action on behalf of themselves and a class that they define as: "All participants in and beneficiaries of the Plan who elected to receive a benefit calculated using: (1) the 1971 GAM table (with setbacks) and a 6% interest rate; or (2) the 1983 GAM table (with setbacks) and a 5% interest rate." Id. ¶ 100. They do not define a class period.

Plaintiffs claim that Defendants’ use of these mortality tables to calculate the amount of Non-SLA...