Southern Company Pension Plan Outdated Actuarial Calculations Class Action

This class action concerns a lowering of benefits in the Southern Company Pension Plan for married couples to pay for a qualified preretirement survivor annuity (QPSA) provision. The parties sued are the pension plan, Southern Company Services, Inc., and the Benefits Administration Committee, which the complaint alleges violate the Employee Retirement Income Security Act (ERISA) and other regulations.

At retirement, single participants in the plan get a single life annuity, or a monthly payment for the rest of the participant’s life. But married participants get a joint and survivor annuity (JSA) that provides a payment for the participant’s life, and then, after the participant’s death, a continuing benefit to the spouse, with that later benefit typically being 50%, 75%, or 100% of the benefit paid to the participant.

The JSA is supposed to be “actuarially equivalent” to the single life annuity, that is, it is supposed to have the same economic value.

The Southern Company Pension Plan has a qualified preretirement survivor annuity (QPSA) provision, which is a death benefit paid to a spouse if the vested participant dies before retirement. The plan may charge for this benefit, and the complaint claims the Southern plan charged in a way that reduced JSAs. The complaint alleges, “The QPSA charge thus reduced their joint and survivor annuities below the actuarial equivalent of their accrued benefits. The QPSA charge was also excessive and based on flawed actuarial assumptions.”

According to the complaint, the plan uses “outdated and erroneous actuarial assumptions … to calculate” JSAs and QPSA charges, including what the complaint says are “actuarial assumptions that are more than 70 years out of date.”

The complaint alleges that the plan uses the sex-specific 1951 Group Annuity Mortality (GAM) Table, which it claims was developed by “stud[ying] life experience during the years 1946 to 1950 among persons at or near retirement age (i.e., persons born in the late 1800s).” This table has been superseded several times, the complaint alleges, including at least in 1971, 1984, 1994, and beyond.

Two classes have been defined for this action:

• The JSA Class is all participants in the plan (and their beneficiaries) who are receiving a joint and survivor annuity (or, for beneficiaries whose spouse died before starting benefits, a pre-retirement survivor annuity) through the plan that is less than the value of the single life annuity available to unmarried participants, when converted to a joint and survivor annuity using the interest rates and mortality tables set forth in 26 USC § 417(e).
• The QPSA Class is all participants in the plan (and their beneficiaries) whose accrued benefit was reduced by a QPSA charge that was greater in magnitude than a QPSA charge calculated using the interest rates and mortality table set forth in 26 USC § 417(e).

Article Type: Lawsuit
Topic: Employment
Tags: Actuarial Assumptions, ERISA, Employment Benefits, Excessive Fees, Retirement Plans, charge