ERISA Law-of-the-Case: Prohibition on Mortality Discounts and Uniform Projection Rates in Residual Annuity Calculations

Introduction

McCutcheon v. Colgate-Palmolive Co., decided April 4, 2025 by the U.S. Court of Appeals for the Second Circuit, resolves two procedural and substantive disputes under the Employee Retirement Income Security Act (ERISA). Plaintiffs Rebecca McCutcheon and Paul Caufield, on behalf of themselves and all others similarly situated, challenged Colgate-Palmolive’s administration of its Employee’s Retirement Income Plan. At issue were two technical aspects of the “Residual Annuity” benefit created by a 2005 Plan amendment to cure forfeitures arising from earlier changes:

Use of a pre-retirement mortality discount (PRMD) when converting a lump-sum equivalent back into an annuity payable before age 65;
Choice of projection rate—whether the same “20 plus 1%” rate applies to both employer-funded cash balances and employee contributions under Appendix C’s § 2(b)(ii) benefit.

After the district court granted summary judgment to Plaintiffs on both issues (McCutcheon I), and this Court affirmed (McCutcheon II), the district court implemented that mandate. Defendants sought reconsideration of those two discrete points. On review, the Second Circuit held that both contentions were foreclosed by the law-of-the-case and mandate rules, and that the original interpretation was correct. The district court’s amended judgment was therefore affirmed.

Summary of the Judgment

The Second Circuit’s summary order (1) reaffirms that Colgate-Palmolive may not apply a pre-retirement mortality discount when calculating the Residual Annuity benefit, and (2) confirms that the uniform “20 + 1%” projection rate must be used for converting the entire Personal Retirement Account (both employer contributions and employee voluntary contributions) into an age-65 annuity. Both issues had been decided against Defendants in McCutcheon I and II, and were not open for re-argument on remand under the appellate mandate rule.

Judgment: AFFIRMED.

Analysis

Precedents Cited

McCutcheon v. Colgate-Palmolive Co. (McCutcheon I), 481 F. Supp. 3d 252 (S.D.N.Y. 2020) – District court grants Plaintiffs summary judgment on “Error 3” (the two mortality‐discount calculations) and on projection‐rate issues under Appendix C, § 2(b)(ii).
McCutcheon v. Colgate-Palmolive Co. (McCutcheon II), 62 F.4th 674 (2d Cir. 2023) – Second Circuit affirms, holding that ERISA prohibits forfeitures via a pre-retirement mortality discount and that Plan § 1.3 requires use of the 20 + 1% rate to convert PRA balances into age-65 annuities.
Callahan v. County of Suffolk, 96 F.4th 362 (2d Cir. 2024) – Mandate-rule principle that a district court must “scrupulously and fully” carry out an appellate mandate without re-litigating decided issues.
Havlish v. 650 Fifth Ave. Co., 934 F.3d 174 (2d Cir. 2019) – Clarifies that once an issue is ripe and decided on appeal, it cannot be reopened on remand.

Legal Reasoning

1. Law-of-the-Case & Mandate Rule
Once McCutcheon II settled the interpretation of the Plan provisions—prohibiting PRMD in any Residual Annuity calculation and requiring the 20 + 1% rate for all PRA balances—the district court was bound to apply those rulings in implementing its mandate. Under Callahan and Havlish, issues “ripe for review” cannot be raised anew after an appellate affirmation. Defendants’ arguments, though subtly tailored to one of the two applications of PRMD or to employee contributions alone, were in substance identical to challenges already rejected by the Second Circuit.

2. Forfeiture Principle under ERISA
ERISA mandates that a participant not lose benefits “due and payable.” The Court explained that applying a mortality discount to an annuity that does not cease upon a participant’s death would artificially reduce the lump-sum equivalent below the actuarial equivalent of the annuity it replaced—an impermissible forfeiture.

3. Plan Interpretation & Projection Rate
Plan § 1.3 explicitly directs the use of the “20 plus 1%” interest assumption for converting a member’s PRA account—without distinguishing between employer and employee contributions—into an annuity starting at normal retirement age. That reading was sustained on appeal, rejecting any split‐rate approach.

Impact

ERISA Litigation: Reinforces the scope of appellate mandates. Plan administrators cannot hope to re-argue issues decided against them on remand.
Plan Design & Administration: Employers drafting ERISA plans should be precise about how mortality adjustments and projection rates apply. Any ambiguity risks summary judgment.
Benefit Certainty: Participants gain assurance that once a benefit formula is judicially fixed, it will be applied consistently, without surprise discounting.

Complex Concepts Simplified

Pre-Retirement Mortality Discount (PRMD): An actuarial reduction reflecting the chance someone dies before retirement. ERISA forbids using it on an annuity that would still pay a survivor or estate.
Actuarial Equivalent: The lump-sum amount equal in value to a lifetime annuity, calculated using interest rates and life expectancy tables.
Personal Retirement Account (PRA): A hypothetical cash-balance account credited with employer contributions (and, for some employees, voluntary contributions) that can be annuitized at retirement.
Appendix C § 2(b)(ii) Benefit: The annuity equal to the actuarial equivalent of (a) the PRA cash balance funded by employer contributions and (b) the employee’s voluntary contributions.
20 + 1% Rate: An interest assumption equal to the yield on 20-year U.S. Treasury securities plus one percentage point, specified in the Plan for projecting balances.
Mandate Rule / Law-of-the-Case: A procedural principle that forbids a lower court from re-opening issues already decided by an appellate court in the same litigation.

Conclusion

McCutcheon v. Colgate-Palmolive Co. cements two important principles in ERISA benefit litigation:

No Pre-Retirement Mortality Discount: Annuities that continue or leave value to survivors cannot be reduced by assuming the retiree might not live to receive them.
Uniform Projection Rate: Plan provisions specifying a single rate for converting cash balances into annuities must be applied to all cash-balance components, employer and employee alike.

The opinion also underscores that once an appellate court resolves a legal question, litigants cannot relitigate it on remand—providing predictability and finality in long-running ERISA class actions.