Case 3:20-cv-07094-JCS Document 1 Filed 10/12/20 Page 1 of 38
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`Michelle C. Yau (Forthcoming Pro Hac Vice)
`Mary J. Bortscheller (Forthcoming Pro Hac Vice)
`Daniel R. Sutter (Forthcoming Pro Hac Vice)
`COHEN MILSTEIN SELLERS & TOLL PLLC
`1100 New York Ave. NW ● Fifth Floor
`Washington, DC 20005
`Telephone: (202) 408-4600
`Fax: (202) 408-4699
`
`Todd Jackson (Cal. Bar No. 202598)
`Nina Wasow (Cal. Bar No. 242047)
`FEINBERG, JACKSON, WORTHMAN &
`WASOW, LLP
`2030 Addison Street ● Suite 500
`Berkeley, CA 94704
`Telephone: (510) 269-7998
`Fax: (510) 269-7994
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
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`CLASS ACTION COMPLAINT
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`Timothy Scott, Patricia Gilchrist, Karen
`Fisher, Gerald Klein, Helen Maldonado-
`Valtierra, and Dan Koval, on behalf of
`themselves and all others similarly situated,
`Plaintiffs,
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`v.
`AT&T Inc., AT&T Services, Inc. and the
`AT&T Pension Benefit Plan,
`Defendants.
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`Plaintiffs Timothy Scott, Patricia Gilchrist, Karen Fisher, Gerald Klein, Helen Maldonado-
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`Valtierra, and Dan Koval by and through their attorneys, on behalf of themselves and all others
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`similarly situated, allege the following:
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`I. NATURE OF THE ACTION
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`1.
`This is a civil enforcement action brought under sections 502(a)(2) and 502(a)(3) of
`the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1132(a)(2) and
`(a)(3), concerning Defendants’ violations of ERISA’s actuarial equivalence, anti-forfeiture, joint and
`survivor annuity, and early retirement benefit requirements with respect to the AT&T Pension
`Benefit Plan (the “AT&T Plan” or the “Plan”).
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`CLASS ACTION COMPLAINT
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`2.
`Plaintiffs and the class are all vested participants in the AT&T Plan which denies
`them their full ERISA-protected pension benefits. Specifically, Plaintiffs are deprived of their vested
`accrued benefits if they retire before age 65 and/or receive their pension benefit in the form of a Joint
`and Survivor Annuity. This is because the Plan’s terms reduce these alternative forms of benefits
`using “Early Retirement Factors” and “Joint and Survivor Annuity Factors” which result in Plan
`participants receiving less than the actuarial equivalent of their vested accrued benefit, contrary to
`ERISA.
`3.
`A participant’s pension benefit is generally expressed as a monthly pension payment
`beginning at “normal retirement age,” which is age 65 under the AT&T Plan. This monthly payment
`is called a single life annuity1 because it pays a monthly benefit to the participant for her entire life
`(i.e., from the time she retires until her death).
`4.
`Under ERISA, “if an employee’s accrued benefit is to be determined as an amount
`other than an annual benefit commencing at normal retirement age [of 65] . . . the employee’s
`accrued benefit . . . shall be the actuarial equivalent of such benefit[.]” ERISA § 204(c)(3), 29 U.S.C.
`§ 1054(c)(3).
`5.
`Thus, if a participant elects a benefit other than a single life annuity, such alternative
`form of benefit must be the actuarial equivalent of the single life annuity.
`6.
`For example, assume that a plan allows a participant with a single life annuity
`payment of $1,000 per month beginning at age 65 to retire one year early with a reduced monthly
`benefit of $980. To determine whether the two alternative retirement benefits are actuarially
`equivalent (one of $1,000 per month starting at age 65 and the other of $980 per month starting at
`age 64), the present value of each stream of payments must be the same.
`7.
`Present value is calculated using two primary actuarial assumptions: an interest rate
`and a mortality table. The interest rate discounts the value of future payments to reflect the time
`value of money, while the mortality table provides the expected duration of that future payment
`stream based on published tables showing the statistical life expectancy of a person at a given age.
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`1 An annuity provides retirement benefits paid every month from the time the participant
`retires until she dies.
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`8.
`In addition, ERISA § 203(a), 29 U.S.C. § 1053(a), provides that an employee’s right
`to her vested retirement benefits is non-forfeitable and states that paying a participant less than the
`actuarial equivalent value of her accrued benefit results in an illegal forfeiture of her benefits. Thus,
`the Plan terms that reduce participant benefits to less than their actuarial equivalent value violate the
`anti-forfeiture requirement set forth in ERISA § 203(a), 29 U.S.C. § 1053(a).
`9.
`This case concerns two ways in which the AT&T Plan improperly reduces pension
`benefits, in violation of ERISA's provisions and regulations.
`10.
`First, the Plan’s Early Retirement Factors reduce benefits to less than the actuarial
`equivalent amount of the participant’s monthly benefits commencing at age 65, in violation of (i) the
`actuarial equivalence requirement at ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3) and (ii) ERISA’s
`“Form and payment of benefits” rules at § 206(a)(3), 29 U.S.C. § 1056(a)(3), which provide that if a
`plan offers an early retirement benefit, all participants must “receive a benefit not less than the
`benefit to which he would be entitled at the normal retirement age, actuarially reduced under
`regulations prescribed by the Secretary of the Treasury.”
`11.
`For example, under most programs2 of the Plan, if a participant’s normal pension
`benefit beginning at age 65 is $10,000 per month, and she retires at age 60, her monthly benefit is
`reduced by a factor of 0.58.3 As a result, the value of her monthly benefit is 58% of $10,000, or
`$5,800 per month. That level of reduction is prohibited by ERISA because the actuarial equivalent
`benefit she is entitled to receive under ERISA is approximately $7,090 per month.
`12.
`Second, the Plan’s reduction factors used to calculate joint and survivor annuity
`benefits violate the (i) the actuarial equivalence requirement at ERISA § 204(c)(3), 29 U.S.C. §
`1054(c)(3) and (ii) ERISA’s “Qualified Joint and Survivor Annuity” rules at § 205(a)-(d), 29 U.S.C.
`
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`2 Benefits under the Plan are provided through separate “programs,” each of which is a
`separate portion of the Plan that provides benefits to a particular group of participants or
`beneficiaries. To the best of Plaintiffs’ knowledge based on the available information, the separate
`programs correspond to subsidiary companies which merged with or were acquired by AT&T Inc.
`over time.
`3 See Table 2, infra, showing the Early Reduction Factors for the 10 non-cash balance
`programs in the Plan. The Reduction Factor is 0.58 for six of the 10 programs in the Plan, 0.60 for
`two of the programs and 0.58 for two programs.
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`Case 3:20-cv-07094-JCS Document 1 Filed 10/12/20 Page 4 of 38
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`§ 1055(a)-(d), which provide that all ERISA governed defined benefit plans provide Qualified Joint
`and Survivor Annuities, which are the “actuarial equivalent of a single annuity for the life of the
`participant.” ERISA § 205(d)(1)(B), 29 U.S.C. § 1055(d)(1)(B).
`13.
`Pension plans must offer married participants the option of receiving a payment
`stream for their life and their spouse’s life after the retiree dies; this is a “joint and survivor annuity.”
`ERISA § 205(a)-(d), 29 U.S.C. § 1055(a)-(d). The joint annuity is expressed as a percentage of the
`benefit paid during the retiree’s life. For married participants, the joint and survivor annuity is the
`default form of pension payment unless the spouse consents to the participant receiving a single life
`annuity.
`14.
`Relevant here, the Plan’s Joint and Survivor Annuity Factors reduce benefits to less
`than the actuarial equivalent amount of a participant’s benefit expressed as a single life annuity at the
`age of retirement. For example, if, at retirement, a participant’s single life annuity benefit is $10,000
`per month, and she is married, her default form of benefit is a 50% Joint and Survivor Annuity,
`which is reduced by a factor of 0.90 for most programs under the Plan.4 As a result, the participant’s
`monthly benefit is 90% of $10,000 per month, or $9,000 per month. This level of reduction is
`prohibited by ERISA because the actuarial equivalent benefit she is entitled to receive under ERISA
`is approximately $9,200 per month.
`15.
`Additionally, the Plan maintains Joint and Survivor Annuity Factors (set forth below
`in Table 1) that reduce those benefits to less than the actuarial equivalent of the participant’s single
`life annuity benefit, even though the applicable Treasury regulations5 require that “[a] qualified joint
`and survivor annuity must be at least the actuarial equivalent of the [single life annuity]. Equivalence
`may be determined, on the basis of consistently applied reasonable actuarial factors[.]” 26 CFR §
`1.401(a)-11(b)(2).
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`4 See Table 1, infra, showing the Joint and Survivor Factors for the 15 programs in the Plan.
`The Reduction Factor is 0.90 for nine of programs in the Plan, 0.88 for three of the programs, and
`0.85 for the remaining three programs.
`5 The Tax Code contains numerous provisions which correspond to ERISA; here the
`provision which corresponds to ERISA § 205 (29 U.S.C. § 1055) is 26 U.S.C. § 401(a)(11).
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`16.
`In sum, ERISA requires (1) that if a plan allows a participant to retire early with a
`reduced monthly pension, the value of such reduced pension must be actuarially equivalent to the
`participant’s monthly pension benefit commencing at age 65; and (2) that default joint and survivor
`annuities paid to married retirees must also be actuarially equivalent to the single life annuity
`available to them at a particular retirement age. In violation of ERISA, the Early Retirement Factors
`and the Joint and Survivor Annuity Factors set forth in the AT&T Plan reduce participant benefits
`below their actuarial equivalent value.
`17.
`To the best of Plaintiffs’ knowledge based on the available information, the Early
`Retirement Factors and the Joint and Survivor Annuity Factors in the AT&T Plan generally
`applicable to the Class have not been updated in over a decade, despite dramatic increases in
`longevity amongst the American public. Because the Early Retirement and the Joint and Survivor
`Annuity Factors have not been updated to be in line with reasonable actuarial assumptions, they do
`not yield actuarially equivalent payments to Class members as required by ERISA. As a result,
`Defendants have improperly reduced Class members’ pension benefits in violation of ERISA §§
`203(a), 204(c)(3), 205(d)(1)(B), 206(a)(3). 29 U.S.C. §§ 1053(a), 1054(c)(3), 1055(d)(1)(B) and
`1056(a)(3).
`18. When retiring or deciding whether to retire, Plan participants like Plaintiffs rely upon
`information provided to them by Defendants that describes the retirement options available to them.
`Defendants’ incorporate the Early Retirement Factors and the Joint and Survivor Annuity Factors
`into their disclosures, leading Plan participants to believe that certain option forms of retirement
`benefit are less valuable to them that ERISA provides. In effect, Defendants’ disclosures that are
`based on the Early Retirement Factors and the Joint and Survivor Annuity Factors cause participants
`to delay retirement or avoid certain forms of benefit that have been dramatically reduced below
`levels ERISA protects.
`19.
`The Class members, consisting of participants and beneficiaries of the AT&T Plan,
`are harmed by Defendants’ calculation and payment of benefits that result in less than the actuarial
`equivalent of their protected retirement benefits, in violation of ERISA.
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`20.
`The Class members are additionally harmed by Defendants’ disclosures of because
`Class Members do not receive accurate information that is mandated by law and are unable to plan
`for their retirement without misimpressions about the value of benefits available to them under
`ERISA.
`21.
`Plaintiffs bring this action on behalf of the Class pursuant to ERISA § 502(a)(2) and
`(a)(3), 29 U.S.C. 1132(a)(2) and (a)(3) for all appropriate equitable relief, including but not limited
`to: a declaration that the Plan’s Early Retirement Factors and Joint and Survivor Annuity Factors
`violate ERISA’s actuarial equivalence and non-forfeitability requirements; an injunction requiring
`Plan fiduciaries to ensure that the Plan pays actuarially equivalent benefits to all participants; an
`injunction requiring AT&T Inc. to amend the Plan terms to comply with ERISA; reformation of the
`Plan to bring its terms into compliance with ERISA; and recalculation of benefits for all participants
`who received a Joint and Survivor Annuity or Early Retirement Benefit, and payment to them of the
`amounts owed under an ERISA-compliant plan.
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`II. JURISDICTION AND VENUE
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`22.
`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
`§ 1331 because it is a civil action arising under the laws of the United States, and pursuant to 29
`U.S.C. § 1332(e)(1), which provides for federal jurisdiction of actions brought under Title I of
`ERISA.
`23.
`This Court has personal jurisdiction over AT&T Inc. because it transacts business in,
`employs people, and has significant contacts with this District, and because ERISA provides for
`nationwide service of process.
`24.
`This Court has personal jurisdiction over the AT&T Plan because it offers and pays
`pension benefits to participants and beneficiaries in this District, and because ERISA provides for
`nationwide service of process.
`25.
`This Court has personal jurisdiction over AT&T Services Inc. because it transacts
`business in, and has significant contacts with, this District, and because ERISA provides for
`nationwide service of process.
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`26.
`Venue is proper in this District pursuant to ERISA § 502(e)(2), 29 U.S.C. §
`1132(e)(2), because Defendant AT&T Inc. may be found in, employed Plaintiffs Scott, Gilchrist, and
`other Plan participants in, and otherwise does business in this District.
`27.
`Venue is proper in this District pursuant to ERISA § 502(e)(2), 29 U.S.C. §
`1132(e)(2), because on information and belief, thousands of Plan participants reside in this District.
`28.
`Venue is proper in this District pursuant to ERISA § 502(e)(2), 29 U.S.C. §
`1132(e)(2) because Plaintiffs Scott and Gilchrist reside and may be found in this District, and they
`worked for AT&T Inc. or one of its subsidiaries in this district.
`29.
`Venue is also proper in this District pursuant to 28 U.S.C. § 1391 because Defendant
`AT&T Inc. does business in this District.
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`III. PARTIES
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`Plaintiffs
`30.
`Plaintiff Timothy Scott is a resident of Newark, California. He worked for AT&T
`Services, Inc. or its predecessors in Oakland, California from August 1981 to August 2015 and
`participates in the West Program of the Plan. In 2015, Plaintiff Scott retired at age 58 and started
`receiving a 75% joint and survivor annuity. Based on the information available to Plaintiffs, Plaintiff
`Scott is harmed because Defendants applied a Joint and Survivor Annuity Factor to the calculation
`of his benefit, so that he is receiving less than the actuarial equivalent of the single life annuity
`option that was available to him when he retired at age 58.
`31.
`Plaintiff Patricia Gilchrist is a resident of Brentwood, California. She worked for
`AT&T Inc. or its predecessors from April 1979 to October 2012 and participates in the Non-
`Bargained Program of the Plan. In 2012, Plaintiff Gilchrist retired at age 55 and started receiving a
`50% joint and survivor annuity. Based on the information available to Plaintiffs, Plaintiff Gilchrist is
`harmed because Defendants applied a Joint and Survivor Annuity Factor to the calculation of her
`benefit, so that she is receiving less than the actuarial equivalent of the single life annuity option that
`was available to her when she retired at age 55.
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`32.
`Plaintiff Gerald Klein is a resident of El Dorado Hills, California. He worked for AT&T
`Inc. or its predecessors from March 1996 until March 2019 and participates in the Nonbargained
`Program of the Plan. In March 2019, Plaintiff Klein retired at age 66 and started receiving a 50% joint
`and survivor annuity. Based on the information available to Plaintiffs, Plaintiff Klein is harmed
`because Defendants applied a Joint and Survivor Annuity Factor to the calculation of his benefit, so
`that he is receiving less than the actuarial equivalent of the single life annuity option available to him
`when he retired in March 2019.
`33.
`Plaintiff Karen Fisher is a resident of Cheney, Kansas. She worked for AT&T, Inc. or
`its predecessors from 1982 to 2007, when she left the company at the age of 46. She is a fully vested
`participant in the Plan. Plaintiff Fisher is harmed because she is unable to commence her pension
`before age 65 without being subject to the Early Retirement Factors and Joint and Survivor Annuity
`Factors, which would result in her receiving less than the actuarial equivalent of her single life annuity
`payable at normal retirement age. Defendants disclose inaccurate information to Plaintiff Fisher about
`the value of retirement benefits available to her under the Plan and ERISA, causing her to change her
`retirement plans to avoid being subject to draconian Reduction Factors.  
`34.
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`Plaintiff Helen Maldonado-Valtierra is a resident of Irving, Texas. She worked for AT&T
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`Inc. or its predecessors from 1993 to 2015 and participates in the Southwest Program of the Plan. In 2015,
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`Plaintiff Maldonado-Valtierra retired at age 63 and started receiving a 50% joint and survivor annuity.
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`Based on the information available to Plaintiffs, Plaintiff Maldonado-Valtierra is harmed because
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`Defendants applied a Joint and Survivor Annuity Factor to the calculation of her benefit, so that she
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`received less than the actuarial equivalent of a single life annuity option available to her when she retired. 
`35.
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`Plaintiff Dan Koval is a resident of Metuchen, New Jersey. He worked for AT&T Inc. or
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`its predecessors for approximately 34 years and participates in the Plan. In 2015, Plaintiff Koval retired at
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`age 55 and started receiving a joint and survivor annuity. Based on the information available to Plaintiffs,
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`Plaintiff Koval is harmed because Defendants applied a Joint and Survivor Annuity Factor to the
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`calculation of his benefit, so that he received less than the actuarial equivalent of a single life annuity
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`option available to him when he retired. 
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`Defendants
`AT&T Inc. is a media company comprised of multiple business units, including
`36.
`AT&T Communications which provides mobile, broadband and other communications services both
`domestically and abroad, and WarnerMedia, which produces entertainment, news, and sports media
`for film and television.
`37.
`AT&T Inc. is the “plan sponsor” for the Plan within the meaning of § 3(16)(B), 29
`U.S.C. § 1002(16)(B).
`38.
`AT&T Inc. makes contributions to the Plan to fund retirement benefits promised
`under the Plan.
`The AT&T Defined Benefit Plan (the “Plan”) is a defined benefit plan within the
`39.
`meaning of ERISA § 3(35), 29 U.S.C. § 1002(35). The Plan is joined as a nominal defendant
`pursuant to Rule 19(a) of the Federal Rules of Civil Procedure solely to assure that complete relief
`can be granted.
`AT&T Services, Inc. (“AT&T Services”) is a wholly-owned subsidiary of
`40.
`AT&T Inc., and is the Plan’s “administrator” within the meaning of ERISA § 3(16)(A), 29 U.S.C. §
`1002(16)(A). It is responsible for the general administration of the Plan.
`41.
`Under the Plan Document6, AT&T Services is and was a “named fiduciary” of the
`Plan at all relevant times within the meaning of ERISA § 402(a), 29 U.S.C. § 1102(a). As such,
`AT&T Services has/had the authority to control and manage the operation and administration of the
`Plan.
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`42.
`Based on AT&T Services’ discretionary authority and/or discretionary responsibility
`for Plan administration set forth in the Plan Document, AT&T Services is also a Plan fiduciary
`within the meaning of § 3(21)(A)(iii), 29 U.S.C. § 1002(21)(A)(iii).
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`6 Pursuant to ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1), the Plan is established and
`maintained according to a written instrument (the “Plan Document”).
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`A.
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`Actuarial Equivalence
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`IV. LEGAL BACKGROUND
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`43.
`Actuarial equivalence is a computation that is designed to ensure that, all else being
`equal, all forms of benefit payments have the same economic value as each other.
`44.
`Generally, an actuarial equivalence computation considers the expected longevity of a
`participant and an interest rate which reflects a rate of return based on current market conditions.
`45.
`To comply with ERISA, as well as to be considered a qualified plan under the Code, a
`plan must comply with specified valuation rules. See Treas. Reg. § 1.411(a)–11(a)(1).
`46.
`ERISA provides that “in the case of any defined benefit plan, if an employee's
`accrued benefit is to be determined as an amount other than an annual benefit commencing at normal
`retirement age ... the employee's accrued benefit ... shall be the actuarial equivalent of such
`benefit[.]” § 204(c)(3), 29 U.S.C. § 1054(c)(3).
`47.
`ERISA defines “normal retirement age” as age 65, or younger if provided by the
`pension plan. ERISA § 3(24), 29 U.S.C. § 1002(24); see also 26 U.S.C. § 411(a)(8); Treas. Reg. §
`1.411(a)–7(b).
`48.
`This actuarial equivalence requirement set forth in ERISA § 204(c)(3), 29 U.S.C. §
`1054(c)(3), is repeated in the parallel Tax Code provision. 26 U.S.C. § 411(c)(3). The Treasury
`regulations that construe 26 U.S.C. § 411(c)(3) likewise confirm the actuarial equivalence rule. 26
`C.F.R. § 1.411(c)-1(e) (referring to the “actuarial equivalence” of the participant’s accrued benefit in
`conformance with Treasury regulations).
`49.
`In addition to the valuation rules referenced above, to comply with ERISA and to be
`considered a qualified trust under the Tax Code, a plan also must comply with certain actuarial
`equivalence rules. 26 CFR § 1.401(a)-11(a)(1).
`50.
`In particular, the early retirement factors applied by the AT&T Plan must result in a
`benefit which “is the benefit to which the participant would have been entitled under the plan at
`normal retirement age, reduced in accordance with reasonable actuarial assumptions.” 26 CFR §
`1.401(a)-14(c)(2) (emphasis added).
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`51. Moreover, the Treasury provides reasonable interest rates and mortality tables that are
`regularly updated. See 26 U.S.C. § 417(e)(3). These interest rates and mortality tables provide a
`reference point that ensures actuarial equivalence for present value calculations.
`52.
`For early retirement benefits, ERISA § 206(a)(3) provides that all participants
`electing early retirement must “receive a benefit not less than the benefit to which he would be
`entitled at the normal retirement age, actuarially reduced under regulations prescribed by the
`Secretary of the Treasury.” 29 U.S.C. § 1056(a)(3).
`53.
`For a “qualified joint and survivor annuity,” ERISA § 205(a), 29 U.S.C. 1055(a)
`requires that pension plans offer married participants the option of receiving a payment stream for
`their life and their spouse’s life after the retiree dies; this is a “joint and survivor annuity.” ERISA §
`205(a)-(d), 29 U.S.C. § 1055(a)-(d).
`54.
`ERISA also provides that the qualified joint and survivor annuity shall be “the
`actuarial equivalent of a single life annuity for the life of the participant.” ERISA § 205(d)(1)(B),
`29 U.S.C. § 1055(d)(1)(B) (emphasis added). This definition is repeated in the Tax Code provision
`of ERISA at 26 U.S.C. § 417(b)(2) (defining “Qualified Joint and Survivor Annuity” as “the
`actuarial equivalent of a single life annuity for the life of the participant.”).
`55.
`Similarly, the Treasury regulations concerning joint and survivor annuities require
`that a “qualified joint and survivor annuity must be at least the actuarial equivalent of the normal
`form of life annuity or, if greater, of any optional form of life annuity offered under the plan.
`Equivalence may be determined, on the basis of consistently applied reasonable actuarial factors[.]”
`26 C.F.R. § 1.401(a)-11(b)(2) (emphasis added).
`56.
`Treasury regulation explain this means “in the case of a married participant, the QJSA
`must be at least as valuable as any other optional form of benefit payable under the plan at the
`same time.” 26 C.F.R. § 1.401(a)-20 Q&A-16 (emphasis added)
`57.
`In effect, the default form of pension annuity paid to a married retiree should have the
`same value as the single life annuity that retiree could have elected and would be paid to that
`retiree’s analogous unmarried co-worker of the same age.
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`B.
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`Non-Forfeitability
`58.
`ERISA § 203(a), 29 U.S.C. § 1053(a), sets forth “Nonforfeitability requirements,”
`which provide that “an employee’s right to his normal retirement benefit is non-forfeitable upon the
`attainment of normal retirement age[.]”
`59.
`The Treasury regulation which “defines the term ‘nonforfeitable’ for purposes of
`these [non-forfeitability] requirements,” 26 C.F.R. § 1.411(a)-4(a), states that “adjustments in excess
`of reasonable actuarial reductions, can result in rights being forfeitable.” (emphasis added).
`60.
`Similarly, the Treasury regulation which concerns “non-forfeitability” in the context
`of early retirement, 26 C.F.R. § 1.401(a)-14, states that a participant who retires early “is entitled to
`receive not less than the reduced normal retirement benefit described in paragraph (c)(2) of this
`section.” In turn, paragraph (c)(2) entitled “Reduced normal retirement benefit,” states that “the
`reduced normal retirement benefit is the benefit to which the participant would have been entitled
`under the plan at normal retirement age, reduced in accordance with reasonable actuarial
`assumptions.” (emphasis added).
`61.
`Thus, distribution of early retirement benefits that are less than their actuarial
`equivalent value constitutes an impermissible forfeiture under ERISA § 203(a), 29 U.S.C. § 1053(a).
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`A.
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`The AT&T Plan
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`V. FACTUAL ALLEGATIONS
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`62.
`The Plan is an “employee pension benefit plan” within the meaning of ERISA §
`3(2)(A), 29 U.S.C. § 1002(2)(A) and a defined benefit plan within the meaning of ERISA § 3(35),
`29 U.S.C. § 1002(35).
`63.
`Pursuant to ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1), the Plan is established and
`maintained according to a written instrument (the “Plan Document”).
`64.
`The Plan provides retirement benefits to substantially all U.S. bargained and non-
`bargained employees of AT&T Inc. and its subsidiaries. As of the 2018 Plan year, the Plan had more
`than 475,000 participants and assets valued at approximately $49 billion.
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`65.
`Benefits under the Plan are provided through separate programs that each provide
`benefits to a particular group of participants or beneficiaries. To the best of Plaintiffs’ knowledge
`based on the available information, the separate programs correspond to subsidiary companies which
`merged with or were acquired by AT&T Inc. over time.
`66.
`To the best of Plaintiffs’ knowledge based on the available information, tens of
`thousands of Plan participants live in California, including in this District, and receive benefits
`through the Plan.
`67.
`Under the Plan, a participant’s normal retirement benefit is expressed as a series of
`monthly benefit payments beginning at “normal retirement age,” and continuing until a participant’s
`death. No payments are made after the participant’s death. An annuity commencing at retirement and
`ceasing at the retiree’s death is called a “single life annuity.”
`68.
`The default form of payment for unmarried participants is a single life annuity.
`69.
`The Plan defines “Actuarial Equivalence” as “equality in value of the aggregate
`amounts expected to be received under different times and forms of payment using the Applicable
`Interest Rate and Applicable Mortality Table.”
`70.
`Though the Plan Document purports to calculate actuarial equivalent benefits for
`some participants by using the “applicable interest rate” and the “applicable mortality table”
`specified in 26 U.S.C. § 417(e)(3), the Plan does not in fact pay the “actuarial equivalent” for Early
`Retirement Benefits nor Joint and Survivor Annuities.
`71.
`Rather, it determines retirement benefits after applying the: (i) Joint and Survivor
`Annuity Factors; (ii) Early Retirement Factors; or (iii) both. These “Reduction Factors” contained in
`the Plan Document result in participants receiving less than the actuarial equivalent of their vested
`accrued benefit, in violation of ERISA. This constitutes equitable fraud or inequitable conduct.
`72.
`AT&T Services, as the Plan’s Named Fiduciary and Plan Administrator was
`responsible for calculating and paying benefits in accordance with ERISA’s requirements and the
`Plan’s terms, unless those Plan terms themselves violated ERISA. AT&T Services acted disloyally
`because it calculated retirement benefits using the Early Retirement Factors and Joint and Survivor
`Annuity Factors, which resulted in Class members receiving less than the actuarial equivalent of
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`their vested accrued benefit. This allowed AT&T Services’ corporate parent, AT&T, Inc., to save
`money by reducing the amount of money AT&T Inc., the Plan sponsor, had to contribute to the Plan
`to fund benefits.
`73.
`AT&T Services’ utilization of the Early Retirement Factors and Joint and Survivor
`Annuity Factors to calculate retirement benefits for the Plan also allowed its corporate parent, AT&T
`Inc., to report in its SEC-mandated disclosure to shareholders a smaller pension benefit obligation,
`which improperly reduced AT&T, Inc.’s disclosed corporate liabilities and misrepresented AT&T’s
`true financial picture.
`B.
`Joint and Survivor Annuity Benefits Under the Plan
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`74.
`For the Class, the Reduction Factors AT&T Services applies to determine Joint and
`Survivor Annuities result in payment of a benefit that is l