Masten v. Metropolitan Life Insurance Company

Background

William Masten and Catherine McAlister brought a putative class action against Metropolitan Life Insurance Company, the Metropolitan Life Insurance Company Employee Benefits Committee, and individual committee members. They alleged that the Metropolitan Life Retirement Plan used mortality tables from 1971 and 1983, along with specified interest rates, when converting single-life annuities into alternative pension benefits. According to the complaint, those tables predicted earlier deaths than more current tables and therefore produced lower benefits.

The plaintiffs asserted claims under the Employee Retirement Income Security Act of 1974 (ERISA). They alleged that the plan’s assumptions violated ERISA’s requirement that certain joint-and-survivor and optional-survivor benefits be actuarially equivalent to a single annuity for the participant’s life. They also alleged violations of ERISA’s non-forfeiture requirements, sought reformation of the plan, and claimed that MetLife and the committee breached their fiduciary duties by administering a plan that did not comply with ERISA.

Motion to Dismiss

The defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint plausibly states a legal claim. The court accepted the complaint’s well-pleaded factual allegations as true for purposes of the motion and also considered the retirement plan documents incorporated into the complaint.

The defendants argued that the plaintiffs had not identified which actuarial assumptions would be reasonable and had not shown that the challenged tables caused an injury. The court rejected those arguments at the pleading stage. The plaintiffs alleged that newer mortality tables were available, that the older tables reduced the present value of their benefits, and that the plan should be reformed by replacing the older tables with current ones. The court held that the complaint provided enough context about the requested relief and plausibly alleged injury.

ERISA’s Reasonableness Requirement

The court held that ERISA requires plan administrators to use reasonable actuarial assumptions when converting single-life annuities into alternative benefits. Although ERISA does not define “actuarial equivalent,” the court reasoned that plans cannot have unlimited discretion to select assumptions because that would undermine ERISA’s protections for pension participants. The court relied in part on Second Circuit decisions limiting plan administrators’ discretion and on Treasury regulations referring to reasonable actuarial factors.

The court found that the plaintiffs plausibly alleged that the 1971 and 1983 mortality tables were unreasonable in this context. The complaint alleged that the tables did not account for improvements in medicine and lifestyle and that more recent tables were available and used by the Society of Actuaries and the Treasury Department. The court therefore allowed the claims under ERISA Sections 205 and 203 to proceed. Section 205 concerns actuarial equivalence for certain alternative annuity forms; Section 203 protects employees’ non-forfeitable rights to accrued benefits.

The court also allowed the fiduciary-duty claim to proceed insofar as it was based on an alleged ERISA violation. It reasoned that ERISA fiduciaries must administer plans consistently with ERISA’s substantive requirements and that violating those requirements may support a fiduciary-duty claim.

Timeliness of Masten’s Claims

The defendants argued that Masten’s claims were barred by ERISA’s time limits because he received retirement-related documents and began receiving payments in 2012. The court distinguished between Masten’s statutory claims and his fiduciary-breach claims.

The court denied dismissal of Masten’s statutory claims as untimely. It could not determine from the complaint and the materials submitted with the motion when Masten received enough information to know, or reasonably should have known, about the alleged use of outdated actuarial assumptions. His pension-calculation statement listed payment amounts but did not explain how those amounts were calculated, and the record did not establish when he received a plan document identifying the mortality tables.

The court reached a different conclusion about Masten’s fiduciary-breach claims. It reasoned that the alleged breach occurred when the plan selected or used the outdated tables, before Masten selected benefits in November 2012. Because Masten received his first payment on December 1, 2012, the court inferred that he knew of the alleged breach by that time, more than three years before the complaint was filed. The court therefore dismissed Masten’s fiduciary-breach claims as untimely.

Administrative Exhaustion

The defendants also argued that the case should be dismissed or stayed because the plaintiffs had not completed the plan’s administrative procedures. The court declined to do so. Without deciding whether exhaustion was required for these statutory claims, the court found that the defendants had not identified a plan provision the plaintiffs failed to follow or explained what administrative process would decide whether the actuarial assumptions were reasonable.

Disposition

The court’s order granted the defendants’ motion to dismiss with respect to Masten’s claims for breach of fiduciary duty and denied the motion in all other respects. The court lifted the stay and directed the parties to submit a proposed case-management plan and scheduling order.