Knight v. International Business Machines Corporation

Background

Joshua Knight, Michael Campbell, and Ernest Fabrizio brought a proposed class action under sections 502(a)(2) and 502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA). The defendants were International Business Machines Corporation (IBM), the IBM Personal Pension Plan, and the Plan Administrator Committee.

The Plan normally calculated benefits as a single-life annuity but also provided qualified joint-and-survivor annuities for married participants. The Plan used an 8% interest rate and the UP-1984 mortality table, with specified age adjustments, to convert single-life annuities into other forms of benefits. Plaintiffs alleged that these mortality assumptions were outdated and caused joint-and-survivor benefits to be worth less than the actuarial equivalent of the single-life benefit. They also alleged that Defendants failed to disclose that information and that the Plan Administrator Committee breached its fiduciary duties.

Defendants moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim.

Statutory claims

The court held that the Plan’s two-year contractual limitations period was enforceable and reasonable. The period began when a claimant knew or should have known the material facts underlying the claim, even if the claimant did not yet know the legal theory.

The court found that the plaintiffs’ Pension Projection Statements disclosed the relevant actuarial assumptions, including the 8% interest rate and UP-1984 mortality table. The statements also warned that differences in actuarial variables could materially affect the value of optional benefits. Because all plaintiffs received their statements more than two years before Knight filed the complaint on June 2, 2022, the court held that Counts I through III were time-barred and dismissed them.

Fiduciary-duty claim

The court applied ERISA’s three-year limitations period for fiduciary-breach claims because the plaintiffs had actual knowledge of the facts underlying the alleged breach more than three years before the complaint was filed. The court relied on its earlier decision in Masten, which treated knowledge of the alleged use of outdated mortality tables as sufficient when a participant received the first pension payment. The court found that the plaintiffs here had at least as much information through their Pension Projection Statements and dismissed Count IV as untimely.

Ruling and effect

Judge Nelson S. Roman granted Defendants’ motion to dismiss the amended complaint. The court dismissed all claims with prejudice as time-barred, directed the Clerk to enter judgment for Defendants, terminated the motion, and closed the case.