May 6, 2024
CITGO Allegedly Imposed “Marriage Penalty” on Joint and Survivor Annuity Recipients in Its Pension Plans
CHICAGO – Today, a federal judge wholly denied CITGO’s motion for summary judgment on three of four counts, and also partially denied the motion on the fourth count, allowing a proposed class action lawsuit regarding CITGO’s pension benefits to move forward to trial. The lawsuit alleges that that the company violated the federal Employee Retirement Income Security Act (“ERISA”) by failing to properly calculate joint and survivor annuity (“JSA”) benefits for retired employees and imposing a “marriage penalty” that reduced their monthly pension payments.
Specifically, plaintiffs claim that prior to 2018, two CITGO pension plans utilized inaccurate mortality tables (from the 1970s) to determine the value of JSAs, resulting in married retirees consistently receiving less than the actuarial equivalent of a single-life annuity (“SLA”) as required under ERISA. The lawsuit seeks to recover the underpayments, and to reform the CITGO Plans to fully comply with protections afforded by ERISA to pension plan participants and their beneficiaries.
With more than 1,700 participants and beneficiaries in the proposed class receiving JSAs, the estimated financial exposure to CITGO could well exceed $30 million.
“We are very pleased by the judge’s ruling that our clients’ claims against CITGO may proceed to trial,” said Michelle C. Yau, chair of Cohen Milstein’s Employee Benefits/ERISA practice. “Married retirees and their beneficiaries deserve to receive accurate pension payments after years of hard work and should not be shortchanged or subjected to a ‘marriage penalty.’”
In its ruling, the court rejected CITGO’s arguments that the lawsuit should be dismissed on the basis of the statute of limitations, finding that all three plaintiffs could proceed with their actuarial equivalence claims in Counts 1 through 3, and that two of the three plaintiffs could proceed with their breach of fiduciary duty claim in Count 4. Further, the court rejected CITGO’s argument that the Plaintiffs should have exhausted administrative remedies rather than filing suit in federal court, stating that it was “not persuaded that requiring exhaustion would serve any useful purpose in this case.” Finally, the court also held that Plaintiffs’ claims were sufficiently meritorious to proceed to trial and supported by expert testimony.
The lawsuit is brought on behalf a proposed class of retirees in the CITGO Petroleum Corporation Salaried Employees Pension Plan and the CITGO Petroleum Corporation Hourly Employees Pension Plan who are receiving a joint and survivor annuity. Class certification is currently pending.
The case, Urlaub et al v. Citgo Petroleum Corporation et al. (N.D. Ill.), was filed on August 3, 2021 in the United States District Court of the Northern District of Illinois.
This is one of six such cases the firm has recently filed against the largest companies in the U.S., addressing similar claims, including against AT&T, IBM, Intel, Luxottica, and Southern Company.
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