DOL Files Amicus Brief Supporting "Reasonable Actuarial Factor" Analysis for Actuarial Equivalence for QJSA Plans 

The U.S. Department of Labor (DOL) filed an amicus brief in Drummond v. Southern Company Services, No. 24-12773 (11th Cir. Aug. 28, 2024) in support of the plaintiffs-appellants and reversal of a decision of the Northern District of Georgia. The plaintiffs-appellants, retirees of Southern Company Services and vested participants in their defined benefit pension plan, received benefits as qualified joint and survivor annuities (QJSA). ERISA requires QJSA to be the default form of survivor-defined benefit pension benefits (and certain defined contributions plans) for married participants. See 29 U.S.C. § 1055(a)(1). A QJSA is an annuity that lasts the lifetime of the spouse "which is not less than 50 percent of (and is not greater than 100 percent of) the amount of the annuity which is payable during the joint lives of the participant and the spouse" and (b) "which is the actuarial equivalent of a single life annuity for the life of the participant." Id. § 1055(d)(1). With a spouse's written consent, participants can waive their right to receive a QJSA in favor of a single life annuity (SLA), see id. § 1055(c)(1)(A), but if a participant receives a QJSA, the plan must ensure that it is the "actuarial equivalent" of the participant's SLA "for the life of the participant." Id. §§ 1055(a), 1055(d)(1). 

ERISA does not define the terms "actuarial equivalent" or "life of the participant." The Secretary of the Treasury promulgated a regulation that requires that the actuarial equivalence be determined "on the basis of consistently applied reasonable actuarial factors." 26 C.F.R. § 1.401(a)-11(b)(2). 

DOL supports the plaintiffs' position that it was unreasonable for the defendants to use mortality assumptions from the mid-1900s to convert the plaintiffs' SLA benefits into their actuarial equivalent QJSA benefits — an actuarial assumption that did not "reasonably approximate the SLA benefits participants would have received over their actual lives" — in violation of ERISA's actuarial equivalence requirement, its nonforfeiture provision, 29 U.S.C. § 1053(a), as well as its fiduciary standards provision, 29 U.S.C. § 1104(a). Br. at 8. DOL argues that the district court departed from "virtually every other court to consider the question." Id. at 9, 15-16. According to DOL and the plaintiffs, using outdated mortality tables, which effectively calculates shorter life spans for the plan participants, would result in lower SLA and QJSA benefits and therefore would be unreasonable, imprudent, and an impermissible forfeiture of accrued benefits.

Of note, DOL's amicus brief attempts to garner support for the cited Treasury regulation in the wake of Loper Bright Enters. v. Raimondo, stating that "the Secretary of the Treasury has interpretive authority over certain provisions of ERISA, including 29 U.S.C. § 105(d), pursuant to the Reorganization Plan No. 4 of 1978," Br. at 13, and that this regulation has "'particular power to persuade' and is 'especially informative' because 'it rests on factual premises within the agency's expertise.'" Br. at 14 n.6 (quoting Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244, 2267 (2024)). 

GAO Issues Report Comparing Cost to Consumers of Employer-Sponsored Plans to ACA Plans

On November 27, 2024, the U.S. General Accounting Office (GAO) published Report No. 25-106798 (GAO Report), which compares the cost of healthcare to individuals receiving employer-sponsored plans with Affordable Care Act (ACA) marketplace plans (Marketplace Plans). More specifically, the GAO Report compares average premiums and average cost sharing and found that in 2023 two-thirds of Americans received health coverage from private health plans. After surveying data from the Agency for Healthcare Research and Quality (AHRQ) and Centers for Medicare & Medicaid Services (CMS), the GAO found that for the 33 states included in the review (those that use healthcare.gov), in 2022, the estimated average monthly premiums for employer-sponsored plans were lower than the average premiums for Marketplace Plans. However, the GAO also found that after employer contributions to employee premiums and federal premium tax credits for Marketplace Plans, the average estimated monthly enrollee contributions to premiums per covered individual for employer-sponsored plans was higher than the average enrollee contributions to premiums for Marketplace Plans. 

The GAO Report is careful to note that its conclusions are complicated by: (1) differences in covered populations, such as health status and (2) taxes given that enrollee contributions to employer-sponsored plans do not reflect their cost after tax savings. Additionally, the GAO's findings are based on averages and notes that premiums vary for both employer-sponsored and Marketplace Plans across the 33 states; for employer-sponsored plans, by industry; and for Marketplace Plans by tier of coverage. Lastly, there are differences in plan designs, which complicates cost-sharing comparisons across plans. In 2022, estimated average deductibles for employer-sponsored plans were lower than Marketplace Plans, but a higher percentage of Marketplace Plan enrollees are in plans with no deductible. 

The GAO Report also discusses how the loss of federal payments for cost-sharing reductions (CSRs) — which insurers are required to offer to certain low-income Marketplace Plan enrollees — affected Marketplace enrollees such as in the form of premium cost and premium tax credits, especially given that in 2018, the federal government stopped paying these reimbursements, with the responsibility falling on issuers. 

The GAO Report has wide implications for private health plan enrollees, employers who sponsor plans and contribute to premiums, and federal tax policy.