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Employer can’t dispose of calculation-of-benefits suit

Although an employer argued its method of calculating benefits for retirees electing joint and survivor annuities under its defined benefit retirement plan was reasonable under the Employee Retirement Income Security Act, testimony from the plaintiff’s expert witness about the appropriate actuarial assumption was sufficient to defeat the employer’s summary judgment motion.


This class action alleges that Huntington Ingalls Industries Inc., or HII, violated ERISA by using a 50-year-old mortality table to calculate benefits due to retirees electing joint and survivor annuities under its defined benefit retirement plan. Because life expectancies rose substantially since the mortality table was created, the complaint alleges that HII’s use of the outdated mortality estimates deprived Herndon and other beneficiaries of their actuarially equivalent benefits.

Defendants have moved for summary judgment and both sides have filed motions to exclude the other’s experts.

Report and recommendation

Herndon seeks to exclude the testimony of defendants’ expert witness Thomas Terry, claiming that his opinions are irrelevant because they rely on data that was not available until after Herndon retired. I find Terry’s opinions relevant.

Terry does not opine on what Herndon’s benefits should be; rather, he opines on whether the benefit he currently receives is reasonable under current conditions. In doing so, Terry pairs various interest rates with three separate mortality tables. That the data underlying those assumptions encompasses conditions that both predate and postdate 2013 does not render his analysis irrelevant.

Next, defendants seek to exclude plaintiff’s expert witness Mitchell Serota’s testimony on several bases. Defendants primarily argue that Serota’s opinions are unreliable because Serota has “issued multiple reports” that are “riddled with mistakes and misleading assertions” and rest on incorrect assumptions. Defendants also argue that Serota’s testimony is irrelevant and that Serota is not qualified to serve as an expert in this case.

The court finds that Serota is clearly qualified to serve as an expert in this case. An ERISA-enrolled actuary, Serota has considerable experience performing pension valuations, and he has served on the pension committees of the American Academy of Actuaries and the Actuarial Standards Board.

Defendants argue that a number of “errors” in Serota’s various reports have rendered his opinions unreliable. The court disagrees. As plaintiff recognizes, Serota’s reports do include some genuine errors, which Serota has since corrected. But some of the “errors” about which defendants complain reflect either (1) modifications prompted by the discovery of new information provided by defendants or (2) a difference of opinions between the experts as to appropriate actuarial assumptions. Such issues are best reserved for cross-examination.

Finally, defendants argue that Serota’s testimony is irrelevant “because he fails to opine on the central issue in this case – whether the Plan’s conversion factor is unreasonable and, if so, when it became unreasonable.” This argument, however, touches on whether actuarial equivalence is gauged by assessing the reasonableness of the actuarial assumptions underlying the conversion factor (i.e., the interest rate and mortality table) or the reasonableness of the conversion factor itself. The parties have a difference of opinion on this issue, and they are free to present testimony and evidence consistent with their respective theories. As with Terry’s testimony, Serota’s testimony would be helpful to the trier of fact and is thus relevant.

Defendants moved for summary judgment, arguing that plaintiff cannot establish any violation of ERISA’s mandate of actuarially equivalent benefits. They argue that Serota’s opinions, even if admissible, are insufficient to create a dispute of material fact in light of the comparison calculations offered by Terry. I disagree. Serota’s testimony and the evidence of record he relies upon are adequate to create a dispute of material fact regarding the reasonableness of the plan’s legacy part’s actuarial assumptions sufficient to survive summary judgment.

Defendants also vaguely argue that the relief sought by the class action complaint would upset the collectively bargained-for union contract agreed to by class members in prior negotiations. While union approval of the conversion factors may be relevant to the reasonableness determination, however, it does not insulate the issue from scrutiny under ERISA.

For the foregoing reasons, the court recommends that the court deny the parties’ competing motions to exclude and deny defendants’ motion for summary judgment.

District court

After the magistrate judge filed the report and recommendation, defendants filed objections, to which the plaintiff responded. The court, having reviewed the record in its entirety and having examined the objections and made de novo findings with respect thereto, does adopt and approve in full the findings and recommendations set forth in the thorough and well-reasoned report and recommendation.

Plaintiff’s motion to exclude expert denied. Defendants’ motion to exclude expert denied. Defendants’ motion for summary judgment denied.

Herndon v. Huntington Ingalls Industries Inc., Case No. 19-cv-52, Sept. 29, 2020. EDVA at Newport News (Smith). VLW 020-3-493. 40 pp.

VLW 020-3-493