AT&T Defeats ERISA Suit Over Early Retirement Benefits

The plan was being sued for allegedly reducing such benefits by applying an ‘Early Retirement Factor.”

A U.S. District Court judge in Northern California has dismissed a lawsuit accusing AT&T of miscalculating pension benefits for early retirees.

U.S. Magistrate Judge Sallie Kim granted AT&T’s motion to dismiss the Employee Retirement Income Security Act (ERISA) class action suit, calling the plaintiffs’ arguments “both internally inconsistent and illogical.”

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Originally filed a year ago, on October 1, 2019, the suit claimed that AT&T improperly reduced early retirement benefits and joint and survivor annuity (JSA) benefits by applying an “Early Retirement Factor.” According to the complaint, the plaintiffs and proposed class members said they were forced to forfeit accrued, vested pension benefits if they retired before age 65 and/or received their pension benefit in the form of a joint and survivor annuity.

Plaintiffs claimed this loss resulted in them receiving less than the actuarial equivalent of their vested accrued benefit as required by ERISA, and was under benefit calculations for the “normal retirement age” of age 65 at AT&T. Those who retired at their normal retirement age receive a monthly pension payment through a single life annuity (SLA).

The complaint stated that if ERISA requires a plan to allow participants to retire early with a reduced monthly pension, the value of a participant’s reduced monthly pension must be actuarially equivalent to the participant’s monthly pension benefit starting at age 65. Therefore, plaintiffs claimed AT&T violated ERISA rules while accusing the plan’s Early Retirement Factor and Joint and Survivor Annuity Factor of being outdated, claiming that they did not “reflect the general longevity of the American public or reasonable actuarial assumptions.”

Defendants filed a motion to dismiss, arguing that the plaintiffs lacked standing to sue because they did not “demonstrate injury based on the application of the Early Retirement or Joint and Survivor Annuity Factors.” They also argued their benefit calculations were based on “actuarially appropriate methods for ERISA purposes.”

In her decision, Kim wrote that plaintiffs have not and did not demonstrate injury under ERISA, and that the “Early Retirement Factor” applied to calculate benefits is formulated under Section 417(e) of ERISA.

TIAA Says New Mobile Enrollment Experience Is a Sign of the Times

Consumers spent a collective 1.6 trillion hours on mobile devices during the first half of 2020, with a 220% increase in time spent on business apps.

TIAA has introduced a new mobile platform that makes it easier for retirement plan participants to manage their accounts.

The firm says the enhanced experience allows clients to quickly and securely enroll in their plans, change contributions, set investment strategies and update personal details. The platform compresses the enrollment process into a small number of steps and provides recommendations for participants who may need guidance.

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“It is important that plan sponsors continue to encourage retirement plan participation—even in times of crisis—to help create positive long-term financial outcomes for their participants,” says Doug Chittenden, head of institutional relationships at TIAA.

Chittenden says the mobile experience features a “sleek and responsive design” that shows participants only the most important and action-oriented information, in order to ease the on-boarding process and help facilitate the right decisions. The firm says these updates will help participants save for their retirement as they navigate unprecedented challenges brought by COVID-19.

One notable feature of the mobile experience is the presentation of three investment approaches. These include the “choose for me” option, in which participants will be quickly enrolled based on their plan sponsor’s default option; the “help me choose” option, in which TIAA will walk participants through options based on their retirement goals and help them make decisions on all account options, including information on how guaranteed income can impact a participant’s financial future; and finally an option labeled as “choose from a list of available investments.” This final option is meant for participants interested in creating their own asset allocation, who can choose from a list of available investment options.

The announcement from TIAA reflects the increasing digitization of the retirement plan onboarding and account management process. This dynamic was already playing out prior to the coronavirus pandemic, but as TIAA’s leadership explains, the challenges presented by social distancing and remote-first work environments have redoubled the importance of digital plan management technologies.

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