The Pension Rights Center filed an amicus brief in the U.S. Court of Appeals for the Ninth Circut in Bafford v. Northrop Grumman Corp. on August 10, 2020. Northrup-Grumman’s defined benefit plan, like all such plans, must provide participants with an estimate of their retirement benefits on request. Northrup-Grumman, applying an incorrect benefit formula to a group of participants, estimated benefits by more than 100%. The plan then began paying these benefits. Years later the plan discovered that it had been using an incorrect formula. It not only cut participants benefits by more than half, it also began trying to collect the “overpayments” that the plan made. The plan participants were completely innocent and were unaware that they were receiving incorrect benefit amounts.
The participants sued the Northrup-Grumman, the plan’s administrative committee, and an actuarial firm that used the wrong formula, claiming that the mistake was a misrepresentation and the plan should continue paying the benefits it had told the participants they would receive.
Northrup-Grumman said it did nothing wrong, the plan administrative committee said it did not do the calculations so was not responsible, and the actuarial firm said it was not a fiduciary and thus could not be sued under federal law and that it could not be sued under state law either, because ERISA preempted state law. The district court said that the participants had not alleged in their complaint specific facts that showed that any of the defendants did anything wrong other than the actuarial firm making a calculation error, and that calculation errors were not prohibited by the statute.
The participants appealed the decision to the Ninth Circuit. The Pension Rights Center filed a friend-of-the-court brief that said that Grumman-Northrup and the plan administrator did not adequately monitor benefit calculations and the actuarial firm was a fiduciary because it designed the method and procedure that produced the calculation errors.< Back