Mandate Rule and ERISA Benefit Calculations: Finality of Actuarial Assumptions in McCutcheon v. Colgate-Palmolive

Introduction

McCutcheon v. Colgate-Palmolive Co., No. 24-1419 (2d Cir. April 4, 2025), is an appeal from the district court’s implementation of a prior mandate in a decade-long ERISA dispute over the proper calculation of retirement benefits under an amended employee retirement plan (the “Plan”). The plaintiffs, former Colgate-Palmolive employees, alleged that the Plan administrators improperly calculated a “Residual Annuity” benefit—intended to correct forfeitures when lump-sum distributions fell short of the actuarial equivalent of a lifetime annuity. Having already secured summary judgment on key issues (McCutcheon I) and obtained affirmance on appeal (McCutcheon II), the plaintiffs returned to the district court to resolve two discrete calculation questions: (1) whether a pre-retirement mortality discount (PRMD) could be applied when converting a Residual Annuity from age 65 to an earlier payment age, and (2) whether employee contributions should be projected at a different interest rate than employer contributions when converting the hypothetical cash balance to an annuity. The Second Circuit’s summary order affirms the district court’s refusal to revisit these matters, applying both the mandate rule and the law-of-the-case doctrine.

Summary of the Judgment

The Second Circuit unanimously affirmed the district court’s amended final judgment awarding plaintiffs additional ERISA benefits. The court held that:

No pre-retirement mortality discount may be used in reducing Residual Annuities from the normal retirement age of 65 to an earlier payment age, because that issue was decided in McCutcheon I and affirmed in McCutcheon II and is thus law of the case.
The interest rate used to project hypothetical “Personal Retirement Account” balances into an age-65 annuity—namely, the 20-plus-1% Treasury-plus-one-percent rate—applies equally to employee contributions and employer-funded portions, as previously determined and affirmed, and may not be re-opened on remand.
The district court properly implemented this court’s prior mandate and did not err in refusing to allow defendants a second bite at these actuarial assumptions.

Analysis

Precedents Cited

The Second Circuit relied chiefly on two lines of authority governing remand proceedings:

Mandate Rule: Havlish v. 650 Fifth Ave. Co., 934 F.3d 174 (2d Cir. 2019), established that once an appellate court decides an issue, the district court “is under a duty to follow the appellate court’s ruling on that issue.” The mandate rule bars relitigation of matters “ripe for review” on the initial appeal.
Scope of Remand: Callahan v. County of Suffolk, 96 F.4th 362 (2d Cir. 2024), clarifies that the lower court must “scrupulously and fully carry out” the mandate without deferring to the district court’s reasoning but by enforcing its terms in both letter and spirit.

The court also directly applied its own prior decisions in this litigation—McCutcheon I (481 F. Supp. 3d 252 (S.D.N.Y. 2020)) and McCutcheon II (62 F.4th 674 (2d Cir. 2023))—to confirm that the two contested actuarial assumptions had been decided and affirmed.

Legal Reasoning

1. Pre-Retirement Mortality Discount (PRMD): Plaintiffs had alleged in their complaint that defendants’ use of a PRMD to calculate both (a) the “actuarial equivalent of the lump sum” (AE of LS) and (b) the early-retirement reduction factor on the Residual Annuity amounted to an unlawful forfeiture under ERISA’s anti-forfeiture mandate. – In McCutcheon I, defendants failed to oppose plaintiffs’ summary judgment motion on “Error 3” (the two PRMD applications), leading the district court to grant judgment on that basis and on the merits. – In McCutcheon II, defendants again challenged only the AE of LS calculation, and this court affirmed that no PRMD may be used there. The court observed that defendants had abandoned any argument about the early-retirement factor. – Applying the mandate rule and law of the case, the Second Circuit concluded that defendants had waived any separate challenge to PRMD on remand and could not reopen that settled issue.

2. Projection Rate for Employee Contributions: Under Appendix C § 2(b)(ii) of the Plan, a member’s PRA annuity is the actuarial equivalent of (i) the employer’s hypothetical cash-balance account and (ii) the member’s own contributions made to preserve the “grandfathered” annuity. – In McCutcheon I, the district court applied a single projection rate (20%-plus-1% Treasury rate) to both components, as that was the only rate actually used by defendants in their PRA model. – On appeal, defendants argued the district court misread the Plan but never suggested that the two account components could bear different rates. The Second Circuit affirmed application of the 20+1% rate to the entire § 2(b)(ii) benefit. – Defendants’ attempt on remand to argue for a lower rate on employee contributions was thus barred by the mandate rule, since the issue was ripe and litigated in the initial appeal.

Impact

The McCutcheon summary order underscores two critical principles in ERISA and appellate procedure:

Finality of Actuarial Assumptions: Once a benefit-calculation method is upheld on appeal, plan administrators cannot relitigate or adjust those assumptions in subsequent proceedings. This promotes certainty for plan participants and prevents repeated challenges over identical technical issues.
Strict Application of the Mandate Rule: Parties must present all arguments on appeal when they first arise; issues deemed ripe but not raised cannot be revisited on remand. District courts are bound to implement appellate mandates fully and may not entertain new interpretations of the same facts or plan provisions.

Complex Concepts Simplified

Residual Annuity: A supplemental ERISA benefit designed to “make whole” participants whose lump-sum distributions were less than the actuarial equivalent of their guaranteed lifetime annuities.
Actuarial Equivalent (AE of LS): The present-value amount that, if paid as a lump sum, equals the value of a lifetime annuity—typically calculated using mortality tables and interest assumptions.
Pre-Retirement Mortality Discount (PRMD): An actuarial reduction to account for the risk that a participant may die before reaching the annuity start date. ERISA’s anti-forfeiture principle generally prohibits such a reduction if it decreases a guaranteed benefit.
Personal Retirement Account (PRA): A “cash balance” style component added to the grandfathered annuity, funded by employer contributions and optionally by employee contributions to preserve legacy benefits.
Mandate Rule / Law of the Case: Appellate directives become binding law in subsequent proceedings, preventing parties from relitigating issues already decided on appeal.

Conclusion

McCutcheon v. Colgate-Palmolive Co. reinforces the finality of appellate mandates in ERISA benefit litigation. By affirming that (1) no pre-retirement mortality discount may be applied to Residual Annuities and (2) a uniform projection rate must be used for both employer and employee contributions, the Second Circuit closes the door on repeated challenges to the same actuarial assumptions. The case highlights the disciplined application of the mandate rule and law of the case doctrine—ensuring that once an ERISA plan calculation is approved on appeal, participants and administrators alike can rely on its binding effect in all subsequent proceedings.