Mandate Rule Bars Mortality Discounts and Requires Uniform Projection Rates in ERISA Residual Annuity Calculations

Introduction

McCutcheon v. Colgate-Palmolive Co., No. 24-1419 (2d Cir. Apr. 4, 2025), is a summary-order decision of the United States Court of Appeals for the Second Circuit that affirms the Southern District of New York’s amended judgment on ERISA benefits. Plaintiffs Rebecca McCutcheon and Paul Caufield, on behalf of themselves and others similarly situated, challenged Colgate-Palmolive Co. and the related employee retirement plan fiduciaries for allegedly underpaying “Residual Annuity” benefits that arose from a 2005 plan amendment. Key issues on this second appeal were:

Whether the employer could apply a pre-retirement mortality discount (PRMD) when converting a deferred residual annuity from normal retirement age (65) to an earlier payment age.
Whether different projection interest rates could apply to employee contributions versus employer contributions when converting a hypothetical cash‐balance account into a § 2(b)(ii) annuity.

This appeal follows a decade of litigation under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., including two prior reported dispositions: McCutcheon v. Colgate-Palmolive Co., 481 F. Supp. 3d 252 (S.D.N.Y. 2020) (“McCutcheon I”) and 62 F.4th 674 (2d Cir. 2023) (“McCutcheon II”).

Summary of the Judgment

The Second Circuit unanimously affirmed the district court’s amended judgment (McCutcheon III) implementing the mandate from McCutcheon II. Two principal holdings emerged:

No Pre-Retirement Mortality Discount: The law‐of‐the‐case and mandate rules bar Colgate from applying any pre‐retirement mortality discount when converting the deferred Residual Annuity from age 65 to an earlier payment age. Both the district court and this Court had already decided that applying such a discount would create impermissible forfeitures.
Uniform Projection Rate: Colgate must use the 20-year Treasury plus 1% (“20+1%”) interest rate—not a lower rate—for both the employer-funded PRA cash‐balance component and the employee-contribution component when converting hypothetical account balances into a § 2(b)(ii) single-life annuity.

In reaching these holdings, the Court reaffirmed its duty under the mandate rule to “scrupulously and fully carry out” its prior directions, and it rejected any attempt to relitigate issues that were ripe for review in McCutcheon I and II.

Analysis

Precedents Cited

McCutcheon I, 481 F. Supp. 3d 252 (S.D.N.Y. 2020): Granted summary judgment on “Error 3” (mortality discount) and ordered recalculation of Residual Annuities without a mortality adjustment.
McCutcheon II, 62 F.4th 674 (2d Cir. 2023): Affirmed McCutcheon I’s ERISA rulings, holding that a PRMD yields impermissible forfeitures and that § 1.3 of the Plan requires use of the 20+1% rate to convert a Personal Retirement Account (“PRA”) into an age-65 annuity.
Havlish v. 650 Fifth Ave. Co., 934 F.3d 174 (2d Cir. 2019): Established that the mandate rule bars relitigation of issues ripe on initial appeal.
Callahan v. County of Suffolk, 96 F.4th 362 (2d Cir. 2024): Clarified that district courts must implement appellate mandates without re‐examining law‐of‐the‐case issues.

Legal Reasoning

The Court applied two interrelated procedural doctrines:

Law-of-the-Case: Once a court has decided an issue, that decision controls subsequent stages of the same litigation unless an exception applies.
Mandate Rule: On remand, the district court must carry out the appellate court’s mandate faithfully and cannot expand, contract, or modify the appellate ruling.

1. Mortality Discount Issue: Plaintiffs’ complaint labeled both the actuarial‐equivalent‐of‐lump‐sum calculation and the early‐retirement adjustment as a single “Error 3.” In McCutcheon I, Defendants did not oppose Plaintiffs’ motion on Error 3, and the district court granted summary judgment on that ground. McCutcheon II reaffirmed that decision on the merits. Under Havlish and Callahan, the district court and this Court must reject any attempt to bifurcate or relitigate the mortality‐discount issue now.

2. Projection Rate Issue: The operative Plan (§ 1.3) mandates use of the 20+1% rate to convert any PRA account balance into a normal‐age annuity. Although Defendants now contend that employee contributions could be projected at a lower rate, they never pressed this argument in the prior appeals. Accordingly, mandating a single, uniform rate for both employer and employee contributions is consistent with the law‐of‐the‐case and the explicit terms of the Plan.

Impact

This decision has significant consequences for ERISA practitioners and plan administrators:

Pre-Remand Certainty: Parties may not withhold arguments or seek to relitigate issues on remand that were ripe—but unpressed—on the first appeal.
Mortality Discounts: ERISA plans cannot apply pre‐retirement mortality discounts to make‐whole or residual annuity calculations when doing so would undercut the value of the guaranteed benefit.
Projection Rates: Plan administrators should ensure that interest‐rate assumptions for projecting both employer and employee contributions align with the plan document’s instructions, especially in cash‐balance or hybrid plans.
Plan Drafting: Drafters of ERISA plan amendments must explicitly address whether and how mortality adjustments and separate projection rates apply to avoid unintended forfeitures.

Complex Concepts Simplified

Personal Retirement Account (PRA): A hypothetical account in a cash‐balance plan that tracks employer (and sometimes employee) contributions plus interest. At retirement, the PRA balance can be paid as an annuity or lump sum.
Residual Annuity: A corrective benefit created by a plan amendment to compensate participants if the lump‐sum payout was less than the actuarial equivalent of the accrued annuity.
Pre-Retirement Mortality Discount (PRMD): An actuarial adjustment lowering the present‐value calculation of a deferred benefit to account for the chance the participant dies before retirement. Here, its application would have reduced benefits below what ERISA guarantees.
Law-of-the-Case Rule: Holds that once an appellate court decides an issue, the same issue cannot be relitigated in later stages of that same case.
Mandate Rule: Requires the lower court on remand to implement the appellate court’s mandate exactly as directed, without modification.

Conclusion

McCutcheon v. Colgate-Palmolive Co. underscores the binding force of appellate mandates and the law-of-the-case doctrine in ERISA litigation. By prohibiting pre-retirement mortality discounts and enforcing a uniform 20+1% projection rate for all components of a hybrid retirement benefit, the Second Circuit both protects participants from inadvertent forfeitures and provides plan administrators clear guidance on benefit calculations. This decision will shape future demands for benefit corrections and reinforces the principle that plan terms and earlier appellate rulings must be followed to the letter.