Huntington Ingalls Industries has agreed to pay $2.8 million to settle a lawsuit claiming it used outdated mortality tables to calculate monthly benefits for participants and beneficiaries in the “legacy” part of the Huntington Ingalls Industries Inc. Newport News Operations Pension Plan for Employees Covered by United Steelworkers Local 8888 Collective Bargaining Agreement.
According to the settlement agreement, within 60 days of its final approval, the settlement amount less plaintiffs’ awards and attorneys’ fees will be allocated to class members in proportion to the total value of their past and future pension benefit payments. Using that rate for each class member, a mortality table approved by the IRS on April 3, 2019, and updated interest rate assumptions, a monthly benefit increase will also be calculated for each participant and beneficiary in the class.
The Huntington Ingalls complaint stated that the defendants calculated an annuity conversion factor—and thus the present value of the non-single life annuities (SLAs)—for the legacy part of their pension plan using a so-called “1971 Group Annuity Mortality Table.” Beyond projecting that both men and women will live shorter lives in retirement compared with newly prepared tables, the 1971 table assumes 90% of the company’s employees are male and that 90% of contingent annuitants are female—all while using a 6% interest rate.
“Using the 1971 table, which is based on data collected roughly 50 years ago, depresses the present value of non-SLA annuities, resulting in monthly payments that are materially lower than they would be if the defendants used reasonable, current actuarial assumptions,” the complaint alleged. “By using outdated mortality assumptions to calculate non-SLA annuities under the legacy part, the defendants improperly reduce the plaintiff’s benefits.”