The ERISA Industry Committee, the American Benefits Council and the Committee on Investment of Employee Benefit Assets Inc. are urging the U.S. 11th Circuit Court of Appeals to uphold a decision establishing that employers, rather than the courts, have the authority to design and administer benefit plans.

The industry groups argued in an amicus brief filed Monday that the 11th Circuit should reject the request of the plaintiffs in William Drummond v. Southern Co. Services to rewrite the Employee Retirement Income Security Act’s provisions for calculating qualified joint and survivor annuity benefits.

A joint and survivor annuity is a benefit that pays out an annuity both for the duration of the participant’s life and, once the participant dies, for the life of the participant’s surviving spouse.

In the lawsuit, initially filed in September 2022, a former participant of the Southern Co. Pension Plan claimed the company used actuarial assumptions more than 70 years out of date and used “unreasonable assumptions” with respect to calculating retirees’ joint and survivor annuities.

In the second of two amended complaints, filed in September 2023, the plaintiffs asked the district court to graft “reasonableness” and “currentness” standards for mortality assumptions onto the phrase “actuarial equivalent” in the relevant section of the Employee Retirement Income Security Act.

The U.S. District Court for the Northern District of Georgia granted Southern Co.’s motion to dismiss in July 2024, arguing that ERISA does not require that plans determine actuarial equivalence using assumptions that are “reasonable or using specified interest rates and mortality tables.”

In their amicus brief, the industry groups argue that the district court correctly rejected the plaintiffs’ invitation to “fashion unwritten, judge-made standards for actuarial assumptions where the Congress elected not to specify any.”

On December 4, 2024, the Department of Labor, under the administration of former President Joe Biden, filed an amicus brief supporting the retirees’ claims that the qualified joint survivor annuity benefits were erroneously calculated and called for the 11th Circuit to reverse the district court’s dismissal. The DOL argued in its brief that ERISA’s requirement that a qualified joint and survivor annuity be the “actuarial equivalent” of a single life annuity requires the use of reasonable actuarial assumptions.

John Lowell, a partner in October Three Consulting, says ERISA does not reference “reasonable” actuarial assumptions.

“The arguments from the defense in these cases have been that ERISA has many requirements about things needing to be reasonable, [but] where it talks about requiring a definition of actuarial equivalence, it doesn’t say reasonable, and it doesn’t say that they have to be current,” Lowell says.

The industry groups’ brief states that a core tenet of ERISA is that employers—not Congress or the courts—determine benefit plan design and the level of plan design.

“Overthrowing the regulatory regime contemplated by the Congress in 1974 would be a radical step with radical consequences, and this court should reject appellants’ invitation to walk down that path,” the brief states.

The industry groups further argue that the “reasonableness” and “currentness” standards advocated by the plaintiffs come with a cost, bringing “administrative burdens, sometimes unworkable ones, and pointlessly increased costs.”

Lowell says if the appeals court decides that these factors need to be considered when calculating the annuity benefits, every defined benefit plan would have to do this, and plan sponsors could be even more deterred from offering a DB plan.

Tom Cristina, executive director of the ERIC Legal Center, wrote in a statement about the groups’ filing, “The approach contemplated by the [plaintiffs] in Drummond suggests that the courts needlessly meddle, which will inevitably create more litigation, more confusion and more cost for plan sponsors. That means fewer resources available to invest in the plans and those who are served by them. Affirming the ruling of the lower court is critical to preserving the foundation of ERISA.”