Smith v. U.S. Bancorp

Background

Janet Smith, Debra Thorne, Sonja Lindley, and Pamela Kaberline sued U.S. Bancorp, the Employee Benefits Committee, and John/Jane Does 1-5 on behalf of themselves and others similarly situated. They were participants in the U.S. Bank Pension Plan and accrued benefits under its Final Average Pay Formula. The Plan anticipated normal retirement at age 65 but allowed participants to begin receiving benefits as early as age 55.

When a participant began receiving benefits before age 65, the Plan reduced the monthly payment using an Early Commencement Factor. The plaintiffs alleged that these factors produced benefits that were not actuarially equivalent to the benefits they would have received at age 65, violating the Employee Retirement Income Security Act of 1974 (ERISA).

Motion to dismiss standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court accepts plausible factual allegations as true but does not accept bare legal conclusions. The court said factual disputes generally cannot be resolved on a motion to dismiss.

Actuarial-equivalence claims

The plaintiffs brought claims under ERISA’s civil-enforcement provision, 29 U.S.C. § 1132(a), alleging violations of 29 U.S.C. § 1054(c)(3). That provision requires a defined-benefit plan to provide an accrued benefit that is actuarially equivalent when paid in a different form or at a different time from the normal-retirement benefit. In practical terms, the court explained, the benefit paid early must have the same required present value as the normal-retirement benefit under applicable actuarial assumptions.

The defendants argued that the plaintiffs’ claims depended on Tax Code and Treasury regulations that did not create a private right to sue. The court rejected that argument because the regulations were being used as guidance for determining actuarial equivalence, while the plaintiffs’ claims arose under ERISA itself.

The defendants also argued that ERISA did not impose a reasonableness requirement on the Early Commencement Factors. The court stated that the plaintiffs were asserting an actuarial-equivalence requirement, not merely a general reasonableness requirement. It concluded that plans could not freely choose assumptions and methods that would undermine ERISA’s actuarial-equivalence protection. The plaintiffs alleged that the factors were not calculated using required considerations, including applicable interest rates and mortality data. Because those allegations had to be accepted as true at this stage, the court found a plausible claim under § 1054(c)(3). It said discovery would determine whether the allegations were correct.

Anti-forfeiture claim

The plaintiffs also alleged that reducing their benefits below the actuarially equivalent amount violated ERISA’s anti-forfeiture provision, 29 U.S.C. § 1053(a), which protects vested retirement benefits from forfeiture. The court held that, for the same reasons supporting the actuarial-equivalence claim, the plaintiffs had alleged enough facts to state a plausible claim that their benefits had been improperly forfeited.

Failure-to-monitor claim

The plaintiffs’ third count alleged that U.S. Bancorp breached a fiduciary duty under 29 U.S.C. § 1104 by appointing the Employee Benefits Committee and allowing it to approve benefit totals that allegedly violated ERISA. The court held that the allegations in the complaint gave the defendants sufficient notice of the basis for this failure-to-monitor claim and were adequate to survive dismissal.

Timeliness

The defendants argued that the claims were time-barred. They relied on a 30-month limitations provision in the Plan for actions concerning Plan benefits and rights, as well as ERISA’s six-year limitations period for fiduciary-breach claims. The court explained that a limitations defense usually cannot support dismissal unless the complaint itself establishes the defense. It found no facts on the face of the complaint showing that the limitations periods had expired. It also identified factual disputes about whether the Plan’s limitations provision applied and when the relevant periods began.

Disposition

The court held that the plaintiffs had made sufficient factual allegations to plausibly allege ERISA violations. It therefore denied the defendants’ Motion to Dismiss, Docket No. 21. The order allowed the claims to proceed and did not determine whether the Early Commencement Factors ultimately complied with ERISA.