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Smith v. U.S. Bancorp

United States District Court, D. Minnesota

June 26, 2019

Janet Smith, Debra Thorne, Sonja Lindley, and Pamela Kaberline, on behalf of themselves and all others similarly situated, Plaintiffs,
U.S. Bancorp, the Employee Benefits Committee, and John/Jane Does 1-5, Defendants.


          Paul A. Magnuson United States District Court Judge

         This matter is before the Court on Defendants' Motion to Dismiss. (Docket No. 21.) For the following reasons, the Motion is denied.


         This case involves participants in the U.S. Bank Pension Plan (“the Plan”) who elected to receive their benefits before the Plan's anticipated retirement age of 65. Beginning in 2002, Plaintiffs accrued their retirement benefits under the Plan's “Final Average Pay Formula.” (Compl. (Docket No. 1) at 2.) Although the Plan anticipates a retirement age of 65, those who receive benefits under the Final Average Pay Formula can retire as early as age 55. (Id.) Each Plaintiff commenced their Plan benefit as an annuity before age 65. (Defs.' Supp. Mem. (Docket No. 23) at 8.) When a participant elects to start their retirement benefits before age 65, the terms of the Plan require a reduction of their monthly benefit, expressed as a percentage of the normal benefit the participant would have received had they retired at 65. (Compl. at 2.) This is known as the “Early Commencement Factor” (“ECF”). The applicable ECFs for each retirement age are stated in a 2002 “Plan Document” and in subsequent “summary plan descriptions.” (Defs.' Supp. Mem. at 12.) Upon early retirement, each Plaintiff had their monthly benefit reduced by the applicable ECF for their age in accordance with the Plan's terms.

         Plaintiffs contend that the ECFs result in benefits that are not actuarially equivalent to the retirement benefit they would have received at age 65, in violation of the Early Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. Simply put, Plaintiffs argue that Defendants are paying retirees who retire before the age of 65 an unreasonably low percentage of their annuity benefit based on unreasonable actuarial calculations.

         Defendants assert that the Complaint must be dismissed because Plaintiffs' claims rely on regulations that do not allow for a private right of action and, in any event, ERISA does not impose a reasonableness standard on the calculation of ECFs. Defendants also contend that Plaintiffs' claims are insufficiently pled and time-barred.


         To survive a motion to dismiss under Rule 12(b)(6), a complaint need only “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fed.R.Civ.P. 12(b)(6). A claim bears facial plausibility when it allows the Court “to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. When evaluating a motion to dismiss under Rule 12(b)(6), the Court must accept plausible factual allegations as true. Gomez v. Wells Fargo Bank, N.A., 676 F.3d 655, 660 (8th Cir. 2012). But “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, ” are insufficient to support a claim. Iqbal, 556 U.S. at 678. “Though matters outside the pleading may not be considered in deciding a Rule 12 motion to dismiss, documents necessarily embraced by the complaint are not matters outside the pleading.” Ashanti v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012).

         A. ERISA's Applicability

         Plaintiffs bring their claims under 29 U.S.C. § 1132(a), which states that retirement plan participants or beneficiaries may bring a civil action to recover benefits, enforce or clarify rights under their plan, enjoin practices that violate the terms of their plan or ERISA subchapter I, or obtain equitable relief to enforce provisions or redress violations. 29 U.S.C. § 1132(a)(1)(B), (3).

         1. Section 1054(c)(3) and “Actuarial Equivalence”

         Plaintiffs allege that the allegedly improper benefit reductions violate 29 U.S.C. § 1054(c)(3). Section 1054(c)(3) provides that “in the case of any defined benefit plan, if an employee's accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age [e.g., a single life annuity beginning upon early retirement] . . . the employee's accrued benefit . . . shall be the actuarial equivalent of such benefit . . . .”

What these provisions mean in less technical language is that: (1) the accrued benefit under a defined benefit plan must be valued in terms of the annuity that it will yield at normal retirement age; and (2) if the benefit is paid at any other time (e.g., on termination rather than retirement) or in any other form (e.g., a lump sum distribution, instead of annuity) it must be worth at least as much as that annuity.

Esden v. Bank of Boston, 229 F.3d 154, 163 (2d Cir. 2000). “This rule that regardless of any option as to timing or form of distribution, a vested participant in a defined benefit plan must receive a benefit that is the actuarial equivalent of her normal retirement benefit . . .has been repeatedly recognized by courts.” Id. (citing cases). Plaintiffs argue that sources outside of ERISA provide guidance on what constitutes “actuarial equivalence, ” including the Tax Code and Treasury ...

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