Updated IBM may have seen off a lawsuit accusing it of using outdated mortality data to underfund retiree pensions, but an appeals court has now reopened the matter to further litigation.
A three-judge panel of the Second US Circuit Court of Appeals decided yesterday to remand [PDF] a lower court’s dismissal of a proposed class-action lawsuit accusing Big Blue of underpaying pensioners back to the Southern District of New York. Rather than simply dismissing the matter after finding the case had been filed too late, the appeals judges should have tried harder to check the documents’ timing by opening the door to additional document discovery, the panel found.
The original case, filed in 2022 by IBM retiree Joshua Knight, alleged the IBM Personal Pension Plan violated several parts of the Employee Retirement Income Security Act (ERISA) of 1974, particularly those relating to actuarial equivalence, anti-forfeiture, and joint and survivor annuity requirements.
According to Knight and the other plaintiffs, IBM underpaid them by relying on mortality tables from 1984, rather than updated ones. Mortality tables estimate the likelihood people of various ages are to survive until their next birthday and are used, along with other actuarial calculations, to determine both payouts and the amount of money a plan needs to bring in from contributors to remain positive. Per court documents, the 1984 table allegedly relied on “mortality experience data among non-insured private pensioners observed over the years 1965-1970,” which the lawsuit argued would have resulted in predictions of considerably shorter lifespans.
“Plaintiffs allege that the Plan continues to utilize outdated mortality assumptions when calculating joint and survivor benefits for Participants,” SDNY judge Nelson Roman said [PDF] in his dismissal order issued in April 2024. “These outdated assumptions result in a miscalculation of benefits wherein joint and survivor benefits are less than the actuarial equivalent value of a participant’s single life annuity benefit.”
The complaint also alleged that IBM pushed employees to select a joint and survivor annuity based on the outdated table without disclosing the decreased payout, preventing them “from adequately assessing what form of benefit to elect.”
The District Court didn’t touch those arguments, however, deciding that Knight and his co-plaintiffs failed to file their complaints in a timely manner, excusing IBM from responsibility in the matter as the company’s retirement plan included a two-year statute of limitations.
“Based on the explicit contractual language of the Plan, whether or not Plaintiffs were ‘aware of the legal theory underlying the[ir] claim[s],’ the Plan’s limitations period began to run as soon as they knew or should have known the ‘material facts’ on which their action is based,” Roman said last year.
While the Appeals panel granted that Roman had leave to make his decision in the way he did, they disagreed about how the decision was made, deciding that the lower court “erred” in making its decision without allowing the parties the chance to conduct discovery to tease out further support for their claims.
Citing legal precedent, the Appeals panel said that it would have been more appropriate to convert IBM’s request for dismissal into a motion for summary judgement, which would have allowed both sides to conduct discovery and submit additional evidence for their claims. With that, the matter is back in circuit court for additional hearings.
As for whether a second chance will save the case, we contacted both sides for comment but had not heard back at time of publication.
IBM is no stranger to claims that it has treated older employees and retirees poorly – retirees have even taken the matter of age discrimination at Big Blue to the US Supreme Court. Older employees from IBM’s own HR department have themselves sued the company for discriminating against older employees when conducting layoffs, and it was also sued by a group of older workers at IBM and its Kyndryl spinoff over similar allegations. ®
Updated to add
An attorney for the plaintiffs has been in touch in quite a good mood.
“I’m very pleased the Second Circuit vacated the district court decision. This is an important pension case affecting IBM married retirees and their beneficiaries,” said Michelle Yau, chair of Cohen Milstein’s ERISA practice and counsel for the IBM pensioners who brought the lawsuit.
“I look forward to helping our clients seek the justice they deserve.”