On Monday in the Northern District of California, AT&T was sued in a class-action complaint by six former AT&T workers who participate and are beneficiaries to AT&T’s Pension Plan; the suit revolves around AT&T’s alleged violations of the Employee Retirement Income Security Act (ERISA) in regards to the AT&T Pension Benefit Plan.
Specifically, the plaintiffs claimed that AT&T violated “ERISA’s actuarial equivalence, anti-forfeiture, joint and survivor annuity, and early retirement benefit requirements.” Additionally, AT&T is accused of violating the rules concerning form and payment of ERISA benefits and breaching its fiduciary duty.
According to the plaintiffs, they cannot receive their “vested accrued benefits if they retire before age 65 and/or receive their pension benefit in the form of a Joint and Survivor Annuity” because the terms of the AT&T Plan, which “reduce these alternative forms of benefits using ‘Early Retirement Factors’ and ‘Joint and Survivor Annuity Factors’ which result in Plan participants receiving less than the actuarial equivalent of their vested accrued benefit, contrary to ERISA.” Additionally, under ERISA an “employee’s right to her vested retirement benefits is a non-forfeitable”; therefore, “paying a participant less than the actuarial equivalent value of her accrued benefit results in an illegal forfeiture of her benefits.” As a result, AT&T’s Plan terms, which purportedly reduce the benefit amount to less than the actuarial equivalent violate ERISA’s anti-forfeiture requirement.
Typically, a participant would receive a monthly pension payment beginning at age 65 under the AT&T Plan as a single life annuity. Under ERISA, the complaint says, “if an employee’s accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age [of 65]…the employee’s accrued benefit…shall be the actuarial equivalent of such benefit.” Therefore, if a participant selects an alternative to single life annuity, “such alternative form of benefit must be the actuarial equivalent of the single life annuity.” Consequently, the present value of the alternative and the single life annuity must be the same.
According to the plaintiffs, the AT&T plan “improperly reduces pension benefits[ ] in violation of ERISA’s provisions and regulations.” The plaintiffs proffered that the AT&T Plan’s Early Retirement Factors “reduce benefits to less than the actuarial equivalent amount” if the participant had started receiving at age 65; this violates ERISA’s actuarial equivalence requirement and its “Form and payment benefits” rules. As previously described, the participants should have received a benefit amount with a present value equivalent to the actuarial equivalent of a single life annuity amount beginning at age 65.
Additionally, the reduction factors the AT&T Plan used to calculate joint and survivor annuity benefits allegedly violated ERISA’s actuarial equivalence requirement and its “Qualified Joint and Survivor Annuity” rules, “which provide that all ERISA governed defined benefit plans provide Qualified Joint and Survivor Annuities, which are the ‘actuarial equivalent of a single annuity for the life of the participant.’” For instance, “[p]ension plans must offer married participants the option of receiving a payment stream for their life and their spouse’s life after the retiree dies” as a joint and survivor annuity. However, the AT&T Plan allegedly “reduces benefits to less than the actuarial equivalent amount of a participant’s benefit expressed as a single life annuity at the age of retirement” in violation of ERISA and the set applicable Treasury regulations.
The plaintiffs averred that these factors have not been updated to reflect reasonable actuarial assumptions and provide the actuarial equivalent to the plaintiffs and putative class. As a result, the plaintiffs asserted that the Plan “improperly reduced” their pension benefits in violation of ERISA. Furthermore, the plaintiffs alleged that they were misled to believe that certain retirement benefit options were less valuable than what is provided under ERISA, which caused some “participants to delay retirement or avoid certain forms of benefits that have been dramatically reduced below levels ERISA protects.” As a result, they claimed that they did not receive accurate benefit plan information.
The plaintiffs have sought declaratory and injunctive relief, reformation of the AT&T Plan, an accounting of all prior benefit payments wherein the specified reduction factors were used, disgorgement, restitution, surcharge owed amounts, an award for costs and fees and other relief.
The plaintiffs are represented by Cohen Milstein Sellers & Toth PLLC and Feinberg, Jackson, Worthman & Wasow, LLP.