AT&T has agreed to pay $184.1 million to settle a class-action lawsuit accusing the telecommunications giant of underpaying pension benefits to roughly 300,000 current and former employees, resolving a dispute that raised broader questions about how large U.S. corporations calculate retirement benefits under federal pension law.
The proposed settlement, filed on Thursday in the U.S. District Court for the Northern District of California, still requires judicial approval. If approved, it will compensate workers who alleged that AT&T used outdated actuarial assumptions that reduced the value of pension payments made to married employees.
Although AT&T agreed to the settlement, the company denied any wrongdoing, saying it chose to resolve the case to avoid the cost, uncertainty, and distraction of prolonged litigation.
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Employees alleged that outdated calculations reduced pension payments
The lawsuit, first filed in October 2020, accused AT&T of violating the Employee Retirement Income Security Act of 1974 (ERISA), the federal law that establishes minimum standards for private-sector retirement and pension plans.
At the heart of the dispute was the method AT&T used to calculate pension benefits for married employees who elected joint-and-survivor annuities, a common retirement option that continues making payments to a surviving spouse after the retiree dies.
Under ERISA, employers are generally required to ensure that different forms of pension payments are “actuarially equivalent,” meaning each payment option should have approximately the same economic value over a participant’s expected lifetime.
The plaintiffs alleged that AT&T relied on mortality tables that were decades out of date when calculating those benefits.
Because modern retirees generally live longer than earlier actuarial models assumed, employees argued that the company’s calculations understated the value of survivor benefits, resulting in married workers receiving lower monthly pension payments than they were legally entitled to receive.
The lawsuit claimed the methodology systematically disadvantaged employees who chose to provide continued financial security for their spouses in retirement.
Under the proposed agreement, the overwhelming majority of the settlement will go directly toward increasing retirement benefits for affected workers.
According to court filings:
- $149.1 million will be paid as additional pension benefits.
- $113.5 million will be distributed to retired employees.
- $35.6 million will go to current employees participating in the pension plan.
The plaintiffs’ legal team may also seek court approval for up to $35 million in attorneys’ fees and litigation expenses, bringing the total settlement value to $184.1 million.
For many retirees, the settlement could result in adjustments to pension payments that have been calculated using the disputed methodology for years.
Despite agreeing to the settlement, AT&T maintained that it acted lawfully in administering its retirement plan.
In a statement, the company said it settled to avoid the “expense and distraction of prolonged litigation” and reiterated that it remains committed to complying with federal laws governing its pension plans.
The agreement contains no admission that the company violated ERISA or improperly calculated employee benefits.
The Crux of the Case
Beyond the financial settlement, the case highlights a growing area of legal scrutiny for employers that continue to sponsor defined-benefit pension plans.
Although many U.S. companies have shifted toward defined-contribution retirement plans such as 401(k)s, millions of current and retired workers remain covered by traditional pension plans established decades ago.
Administering those plans requires employers to make complex actuarial calculations using assumptions about life expectancy, interest rates, and future payment obligations.
Those assumptions are not static.
As Americans live longer and demographic patterns evolve, mortality tables are periodically updated by actuarial organizations and regulators to better reflect expected lifespans. Using outdated assumptions can materially affect the value of pension payments, particularly for joint-and-survivor annuities, where projected life expectancy directly influences monthly benefit calculations.
The AT&T case shows that seemingly technical actuarial decisions can have significant financial consequences when applied across hundreds of thousands of employees.
The settlement also forms part of a broader trend of increased litigation involving corporate pension plans.
In recent years, employers across several industries have faced lawsuits challenging the actuarial assumptions used to calculate retirement benefits, with plaintiffs arguing that obsolete mortality tables or outdated interest rate assumptions reduced payouts below the actuarially equivalent levels required under ERISA.
As pension obligations increasingly come under legal scrutiny, companies are facing greater pressure to ensure that benefit calculations keep pace with evolving actuarial standards and regulatory expectations. The financial exposure can be substantial because even relatively small differences in monthly pension payments, when applied across hundreds of thousands of participants over many years, can translate into liabilities worth hundreds of millions of dollars.