A 1976 plan, 1984 math, and a 7% interest rate that stopped making sense
Howard University will pay $1.3 million to settle a class action claiming it short-changed nearly 1,800 retirees on their pension benefits.
A federal court in Washington, DC gave the deal preliminary approval on September 18, capping three years of litigation under the Employment Retirement Income Security Act (ERISA).
The fight started with a piece of pension math most people never think about. When a retiree picks a joint and survivor annuity - the option that keeps paying a spouse after the retiree dies - the plan converts the standard single life annuity into that form. Under ERISA, the two must be "actuarially equivalent," meaning the overall value stays the same even though payments spread across two lives.
Howard's Employees' Retirement Plan, set up in 1976 and frozen in 2010, ran those conversions using the 1984 Unisex Pension Mortality Table and a 7% interest rate. The plaintiffs argued those numbers belonged to a different era.
Take the lead plaintiff. He worked at Howard for about 14 years and retired at 70. His joint annuity paid $584.73 a month. Using the Treasury Department's current assumptions, he said that figure should have been $602.72 - a $17.99 monthly gap. Small on its own. Multiply it across 1,788 plan participants and beneficiaries, and the shortfall becomes real money.
The settlement splits the class in two. Members whose annuity payments started on or after August 17, 2017 share 75% of the net amount, allocated by each person's estimated underpayment. Those with earlier start dates share 25%, allocated by current benefit levels.
The payoff is not a one-time cheque. Class members get permanent increases to their monthly pension, plus a lump sum covering the period between final approval and implementation. Increases must kick in within 150 days of final approval.
The court noted the legal landscape for actuarial equivalence claims remains "largely unsettled," with federal circuits divided on whether ERISA requires plan assumptions to be reasonable. A trial would have meant a "costly 'battle of the experts'" over technical actuarial questions. The plaintiffs' actuary pegged recovery at roughly 30.8% for one subgroup and 18.2% for the other.
For benefits teams still running defined benefit plans on legacy assumptions, the message is practical: mortality tables and interest rates written into plan documents in the 1980s may no longer pass muster, and the question is far from settled.
The settlement has received preliminary approval only. Final approval is pending a fairness hearing expected on or after December 18, 2026, and class members retain the right to object.
