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June 1, 2026
On May 26, 2026, the Eleventh Circuit, in Drummond v. Southern Company, sided with plaintiff-participants in a defined benefit plan actuarial equivalence lawsuit, reversing and remanding a lower court decision dismissing plaintiffs’ complaint. The Eleventh Circuit decision follows hard on the heels of the Sixth Circuit’s March 16, 2026, decision in Reichert, et al. v. Kellogg Co., et al./Watt, et al. v. FedEx Corp., et al., reaching a similar result.
In Drummond v. Southern Company, the Eleventh Circuit held that ERISA requires that, in making a qualified joint and survivor annuity conversion and in calculating the charge for a qualified pre-retirement survivor annuity, actuarial assumptions (in this case, mortality assumptions) must be reasonable. The court also found that failure to use reasonable assumptions constituted an impermissible forfeiture.
In this note, we very briefly discuss the court’s decision, beginning with a review of the issue and what is at stake.
As in Reichert v. Kellogg, this case involves a lawsuit by plaintiff-participants in Southern Company’s defined benefit plan who elected payment in the form of a qualified joint and survivor annuity (QJSA). The mortality assumption that was used to convert the participants’ single life benefit to a QJSA was determined based on “the 1951 Group Annuity Mortality Table for males (‘1951 GAM’), with a ‘setback’ of six years for employees and one year for employees’ spouses.”
Plaintiffs in this case also raised an issue not presented in Reichert v. Kellogg: use of that same (allegedly) outdated mortality table to determine the charge for the plan’s qualified preretirement survivor annuity (QPSA).
DB plan use of this and other (allegedly) outdated tables for determining QJSA, QPSA and other actuarial equivalence is not uncommon, although we don’t see this specific table all that often. If the courts decide that benefits that have been in pay status must be recalculated and “back-payments” made, the cost – whether measured by company financials, cash flow, or a variety of other financial metrics – will be significant and in many cases material.
Below, we very briefly sketch out the court’s decision. We will not be going into technical detail on the parties’ arguments and each element of the court’s analysis. What matters for sponsors of DB plans using these sorts of (allegedly) outdated mortality tables for QJSA conversions (and where applicable the charge for QPSA coverage) is that we now
have two courts of appeal that are siding with plaintiffs in a challenge that could cost these plans and their sponsors significant money. In this context, affected sponsors will want to consider consulting with their actuary and counsel about next steps: evaluating whether and to what extent their plan is exposed to this litigation and what possible action they should take. Many sponsors that have performed this sort of analysis have found that the definitions of actuarial equivalence that they use (combining the mortality table and the interest rate) produce benefit amounts that are very close to, and in some cases, even exceed the amounts that would be payable using the plaintiff’s preferred definition.
Plaintiffs claimed that the plan’s use of the 1951 GAM for QJSA conversions violated ERISA’s actuarial equivalent requirement and was an impermissible forfeiture; and that the charge for the pre-retirement QPSA using the same assumption was also an impermissible forfeiture.
Defendants argued that there was no explicit reasonableness requirement in the statutory provisions requiring actuarial equivalence.
In holding for the plaintiffs, the court found the following points required the finding of an implicit reasonableness standard for actuarial equivalence in this context:
Pursuant to “actuarial norms,” “a requirement to use ‘reasonable’ or ‘current’ actuarial assumptions is ‘baked into the concept of an actuarial equivalent.’”
With respect to similar language in the Tax Code, “the Secretary of the Treasury has interpreted the statute’s provision mandating ‘actuarial equivalent’ joint-and-survivor annuities to require conversion from the plan’s ‘normal form of life annuity’ using ‘consistently applied reasonable actuarial factors.’”
“[T]he plain meaning of the words in ‘actuarial equivalent’ suggests reasonable, realistic actuarial assumptions.”
“Depriving ‘actuarial equivalent’ of its force is problematic given the protective purpose that is apparent from the joint-and-survivor annuity provision’s text and statutory context.”
Cost concerns and concerns that the decision would open a “floodgate of litigation,” raised by defendants and representatives of large employers, were understandable. But those concerns “cannot alter the meaning of the statute before us. The text and statutory context of the ‘actuarial equivalence’ requirement compel our interpretation.”
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We will continue to follow this issue.
This is a publication of O3 Plan Advisory Services. If you have any comments or have questions about regulatory developments, please contact your relationship manager or Mike Barry at mbarry@octoberthree.com. The information, analyses, and opinions set out herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. Nothing herein constitutes or should be construed as a legal opinion or advice. You should consult your own attorney, accountant, financial or tax advisor or other planner or consultant with regard to your own situation or that of any entity which you represent or advise. Information set out or referred to above has been obtained from sources believed to be reliable. However, neither O3 Plan Advisory Services nor any of its affiliates has verified the accuracy or completeness of any such information. All information is provided “as is” and O3 Plan Advisory Services and its affiliates expressly disclaim all express and implied warranties regarding the information. Neither O3 Plan Advisory Services nor any of its affiliates shall have any liability for any use of the information set out or referred to herein.