In Drummond v. Southern Company Services, Inc., No. 24-12773 (11th Cir. May 26, 2026), the Eleventh Circuit held that a plan converting one form of annuity into its “actuarial equivalent” under the Employee Retirement Income Security Act of 1974 (“ERISA”) must use the kind of assumptions a reasonable actuary would actually employ.
ERISA requires retirement plans to give married participants their pension benefits as a “joint-and-survivor annuity” unless both the participant and their spouse opt out. ERISA further mandates that the joint and survivor annuity be the “actuarial equivalent” of a single-life annuity for the participant’s life. The term “actuarial equivalent” is not defined in the statute. The plaintiffs in Drummond are former employees who allege that their pension plan calculated their joint-and-survivor benefits using outdated and unreasonable mortality assumptions. The former employees brought a putative class action. The defendant plan sponsor responded by arguing that actuarial assumptions, regardless of reasonableness, must only be written down ahead of time to satisfy ERISA. The defendants moved to dismiss the complaint under Rule 12(b)(6), which the district court granted.
The Eleventh Circuit, in an opinion authored by Judge Rosenbaum and joined by Judges Grant and Brasher, reversed, holding that ERISA’s actuarial-equivalence mandate requires plans to convert annuities “using the kind of actuarial assumptions that a reasonable actuary would employ at the time of the benefit determination.” Since the phrase is undefined in ERISA, the court reviewed professional literature, including the Actuarial Standards of Practice, that direct actuaries to rely on “reasonably” assumptions. Specifically, the court noted that actuarial equivalence connotes a degree of connection to empirical grounding and realistic expectations about the future. The court emphasized, however, that reasonableness may vary, leaving plans with a range of acceptable assumptions.
The defendants argued that Rusello v. United States, 646 U.S. 16 (1983) required an interpretation of actuarial equivalence with no conditions on the assumptions a plan uses. Rusello stands for the principle of statutory interpretation that where Congress includes particular language in one section of a statute but omits the same language in another section, it is generally presumed that Congress acts intentionally and purposefully in the disparate inclusion or exclusion. The defendants argued that because four ERISA provisions expressly mandate “reasonable” actuarial assumptions, the court should presume that Congress acted intentionally in omitting reasonable from the statutory provision at issue. The court rejected this argument because all four provisions cited came years after the actuarial-equivalence rule at issue and because the provisions addressed different concepts. Accordingly, the court reversed the district court’s dismissal of the complaint.