Eleventh Circuit Holds ERISA’s “Actuarial Equivalent” Requirement Mandates Reasonable Actuarial Assumptions, Joining Sixth Circuit

In Drummond v. Southern Company Services, Inc., No. 24-12773, — F.4th —-, 2026 WL 1465861 (11th Cir. May 26, 2026), a putative class action brought by two vested participants in the Southern Company Pension Plan, the Eleventh Circuit reversed the district court’s Rule 12(b)(6) dismissal of all four counts of the operative complaint, holding that ERISA’s “actuarial equivalent” requirement for joint-and-survivor annuities imposes substantive limits on the mortality and interest-rate assumptions plans may use, and that Section 1055(i) likewise caps preretirement-survivor-annuity (“QPSA”) charges at amounts that reasonably reflect a plan’s increased costs of providing the benefit. The Plan, a defined-benefit plan covering more than 56,000 participants and holding roughly $16 billion in assets, calculated Plaintiffs’ retirement benefits using mortality assumptions drawn from the 1951 Group Annuity Mortality Table (with setbacks of six years for employees and one year for spouses) and an assumed annual interest rate of 5 percent. Plaintiffs alleged that these outdated assumptions reduced their lifetime pension benefits by thousands of dollars and constituted unlawful forfeitures of vested accrued benefits.

The court framed the central dispute as whether ERISA Section 1055(d)’s requirement that a qualified joint-and-survivor annuity be the “actuarial equivalent” of a single-life annuity permits a plan to use any actuarial assumptions, however unrealistic, so long as those assumptions are written into the plan document. Defendants advanced a “mathematical equivalency” reading under which a plan need only apply the same assumptions on both sides of the conversion calculation, conceding at oral argument that their interpretation would permit a plan to use mortality data from 1789. The court rejected that reading and joined the Sixth Circuit’s recent decision in Reichert v. Kellogg Co., 170 F.4th 473 (6th Cir. 2026), holding that “actuarial equivalent” is a term of art that requires plans to use the kind of mortality and interest-rate assumptions a reasonable actuary would employ at the time of the benefit determination.

The court grounded its interpretation in the actuarial profession’s own technical literature, particularly the Actuarial Standards of Practice (“ASOPs”) promulgated by the Actuarial Standards Board, which are binding on members of the major U.S. actuarial organizations and direct actuaries to “use professional judgment to select reasonable assumptions” when measuring pension obligations. ASOP No. 27 generally instructs actuaries to use current participant data or recently published mortality tables rather than tables that substantially predate newer data, and to verify that previously selected assumptions remain reasonable. The court observed that these professional norms predate ERISA’s 1974 enactment, citing the 1964 edition of Fundamentals of Private Pensions and other pre-1974 sources for the proposition that actuaries have long been expected to use assumptions “most appropriate for the case at hand” and to modify those assumptions when actual experience deviates significantly. The court also found support in ERISA’s statutory definition of “present value” as a value “adjusted to reflect anticipated events,” 29 U.S.C. § 1002(27), in the longstanding Treasury regulation interpreting the parallel “actuarial equivalent” provision in the Internal Revenue Code to require “consistently applied reasonable actuarial factors,” 26 C.F.R. § 1.401(a)-11(b)(2), and in the plain meaning of “equivalent” and “actuarial” as those terms appeared in dictionaries contemporaneous with ERISA’s enactment. The court cautioned that “reasonableness is a zone, not a point,” and that a range of reasonable assumptions exists within which two actuaries might reach differing but reasonable results.

The court rejected Defendants’ counterarguments. First, the court declined to apply the Russello presumption based on other ERISA provisions that expressly require “reasonable” actuarial assumptions, noting that nearly all of those provisions postdate Section 1055(d)’s actuarial-equivalent requirement by between six and thirty-two years and address different concepts (present-value calculations for funding purposes rather than the comparison of two future streams of payments at issue here). The court observed that, as originally enacted in 1974, ERISA consistently described reductions to present value as requiring reasonable assumptions, and that because actuarial equivalence necessarily includes present-value calculations, a reference to the broader concept incorporates the reasonableness requirement applicable to its component parts. Second, the court rejected Defendants’ policy arguments grounded in predictability, employer flexibility, and concerns about litigation costs, emphasizing that the statutory text and ERISA’s protective purpose, particularly the interlocking spousal protections in Section 1055 added by the Retirement Equity Act of 1984, foreclose a reading that would allow plans to undermine survivor benefits through unreasonable assumptions.

On Plaintiff Odom’s second claim, the court held that the same conversion that violated Section 1055(d)’s actuarial-equivalence requirement also stated a plausible claim under Section 1053(a)’s nonforfeiture rule. The court treated Plaintiff Odom’s “normal retirement benefit” as a single-life annuity, consistent with the Plan’s own definition, and concluded that converting that benefit into a less valuable joint-and-survivor annuity compromised his unconditional, legally enforceable claim to the value of his normal retirement benefit. The court rejected Defendants’ reliance on Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981), explaining that Alessi addressed the calculation of a protected benefit, not what happens after that benefit has been calculated, and relied on the Seventh Circuit’s reasoning in Contilli v. Local 705 International Brotherhood of Teamsters Pension Fund, 559 F.3d 720 (7th Cir. 2009), and on 26 C.F.R. § 1.411(a)-4(a), which expressly recognizes that “adjustments in excess of reasonable actuarial reductions” can result in forfeiture.

On Plaintiffs’ third claim challenging the Plan’s QPSA charges, the court construed Section 1055(i)’s exception to the nonforfeiture rule, which permits a plan to “take into account in any equitable manner (as determined by the Secretary of the Treasury) any increased costs resulting from providing” a preretirement survivor annuity. The court held that the statute’s express delegation to the Secretary of the Treasury, combined with the regulation at 26 C.F.R. § 1.401(a)-20, Q&A 21, which permits only QPSA charges that “reasonably reflect[ ] the cost of providing the QPSA,” cap permissible charges at amounts grounded in reasonable, realistic actuarial assumptions. The statute’s reference to “increased costs” and to an “equitable manner” reinforced that conclusion. Plaintiffs sufficiently alleged that a QPSA charge based on appropriate and updated actuarial assumptions would not exceed approximately 0.3 percent annually for Plaintiff Drummond and 0.6 percent annually for Plaintiff Odom, that their actual charges of 0.875 percent and 0.75 percent exceeded those maximums by 192 percent and 25 percent respectively, and that the resulting reductions to their accrued benefits exceeded what reasonable actuarial assumptions could support. The court rejected Defendants’ adverse-selection argument as bearing on the reasonableness of the Plan’s mortality assumptions, an issue not properly resolved on a motion to dismiss.

Because the parties agreed that an underlying ERISA violation in any of Counts I through III would support the breach-of-fiduciary-duty claim in Count IV, the court reversed the dismissal of that claim as well. The case was reversed and remanded for further proceedings.