Court ruling clears way for retirees to challenge 50-year-old actuarial assumptions in court
A federal appeals court ruled that eyewear giant Luxottica must face claims it shortchanged retirees using pension calculations based on 1971 mortality tables.
The decision, handed down February 5 by the Second Circuit Court of Appeals, allows former Luxottica regional manager Janet Duke to pursue her lawsuit alleging the company underpaid pension benefits by relying on actuarial assumptions nearly half a century old.
Duke retired in 2016 after nearly 21 years with the company and chose a payment option that would continue benefits to a surviving spouse after her death. She claims the pension plan used life expectancy data from 1971 to calculate her monthly checks, resulting in payments about $54 less per month than she would receive under current mortality tables.
The case puts a spotlight on how companies administer their defined benefit pension plans, particularly the assumptions they use to convert different payment options. Under federal retirement law, a joint payment covering both a retiree and spouse must be financially equivalent to a single-life payment covering only the retiree.
What makes the case unusual is timing. Luxottica updated its mortality assumptions in April 2021 for new retirees but continued using the 1971 tables for anyone who retired earlier, including Duke. She argues this creates ongoing violations of federal pension law and puts the plan's tax-favored status at risk.
The company tried to force Duke into private arbitration based on a dispute resolution agreement she signed in 2015. That agreement required individual arbitration of most employment disputes and prohibited class action claims. The district court initially agreed to send her personal benefit claims to arbitration but balked at compelling arbitration of claims she brought on behalf of the pension plan itself.
The appeals court sided with Duke on the arbitration question. Writing for the panel, Circuit Judge Nathan explained that some pension claims are inherently representative in nature because they seek to fix problems affecting the entire plan, not just one person. Forcing those claims into individual arbitration would effectively eliminate them, the court said.
The ruling builds on a 2024 Second Circuit decision that protected the right to bring representative pension claims in court. The court rejected arguments from Luxottica that Duke's case was different because she participates in a traditional defined benefit plan where the employer bears investment risk, rather than a 401(k)-style plan where participants bear that risk.
However, the court handed Luxottica a partial win by ruling Duke cannot seek monetary damages paid back to the plan. Because her employer is responsible for covering any pension shortfalls and would receive any surplus, having the plan replenished with money would not directly help Duke, the court reasoned. She can only pursue her request to force the company to update how it calculates benefits going forward.
The case now returns to district court where a judge will decide whether the 1971 assumptions actually violate pension law. The appeals court did not decide that question, noting it was only ruling on preliminary procedural issues.
For human resources teams managing traditional pension plans, the decision serves as a reminder that actuarial assumptions need regular review and updates. Using outdated mortality tables or interest rates can create both compliance headaches and legal exposure, particularly if the company updates assumptions for some retirees but not others.
The case also illustrates the limits of arbitration agreements in the pension context. While companies can require arbitration of individual benefit disputes, they cannot use those agreements to shut down systemic challenges to how a plan operates.
