Pension Benefits

For many retirees, the difference between a lawful pension calculation and an unlawful one is tens of thousands of dollars over the life of the benefit. And for surviving spouses, the difference can be even larger. Pension plans governed by ERISA must calculate every form of benefit using actuarial assumptions that produce a true actuarial equivalent of the benefit promised by the plan. When a plan uses outdated mortality tables, stale interest rates, or other shortcuts to suppress benefits, retirees lose money that federal law entitles them to.

The attorneys at Siri & Glimstad represent retirees and pension plan participants in actuarial equivalence litigation and other ERISA pension claims against Fortune 500 employers and other large pension plan sponsors nationwide.

Most traditional defined benefit pension plans express the participant’s accrued benefit as a single life annuity (SLA), or a stream of monthly payments for the participant’s life, beginning at normal retirement age, typically 65. ERISA requires plans to offer the benefit in alternative forms, most commonly a joint and survivor annuity, an early retirement annuity, a period certain annuity, or a lump sum.

Whenever the plan converts the basic SLA into one of these alternative forms, ERISA requires that the alternative form be the actuarial equivalent of the SLA.

Actuarial equivalence means that two different pension payments must have the same value. It is not just about what feels fair. It is math. A plan compares the value of different payment options by looking at two things: how long people are expected to live and what interest rate should be used to value future payments today.

If a pension plan uses old or unfair assumptions, retirees can get less money than they should. For example, many plans still use life-expectancy tables from 1971, 1983, or 1984. Those tables assume people will die sooner than people actually do today. When a plan uses those outdated tables, it can make benefits too small.

This problem affects joint and survivor annuities, early retirement benefits, survivor benefits, special annuity options, and lump-sum payments. In simple terms, if the plan uses bad math, the retiree or surviving spouse may be shortchanged. ERISA requires pension benefits to be truly equal in value, not reduced by outdated assumptions.

In actuarial equivalence cases, the typical remedy is a recalculation of the benefit using lawful actuarial assumptions, payment of the difference between the unlawful benefit already paid and the lawful benefit, and ongoing payment of the larger, lawful benefit going forward. The recalculation often results in increases of up to hundreds of dollar each month.

You should consider a pension review if:

• You are receiving pension payments in any form other than a single life annuity, including a joint and survivor annuity or Social Security level income option.
• Your pension plan is sponsored by a large or Fortune 500 employer.
• Your benefit was calculated using mortality assumptions or interest rates that you cannot identify, or that the plan administrator will not disclose.
• You are a surviving spouse receiving a survivor annuity and suspect the conversion factor reduced the benefit.
• You are a deferred vested participant who has not yet begun to draw benefits, but who has questions about how the plan will calculate them.

If you have any reason to believe your pension benefits were undervalued or improperly calculated, contact Siri & Glimstad. We will obtain and review your plan documents, evaluate the actuarial methodology, and pursue full recovery if your benefits have been improperly suppressed.

There is no cost for an initial consultation. We get paid only if we recover benefits on your behalf.