Prohibition of Pre-Retirement Mortality Discounts and Enforced Projection Rates under ERISA: Law-of-the-Case Doctrine in McCutcheon v. Colgate-Palmolive Co.

Introduction

McCutcheon v. Colgate-Palmolive Co., 24-1419 (2d Cir. Apr. 4, 2025) is the second appellate review of a decade-long ERISA dispute. Plaintiffs Rebecca McCutcheon and Paul Caufield, on behalf of themselves and classes of similarly situated former employees, sued under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., challenging the calculation and payment of benefits under Colgate-Palmolive’s defined-benefit plan (the “Plan”). The central issues on the second appeal were:

  • Whether the Plan administrator may apply a pre-retirement mortality discount (“PRMD”) to residual annuity benefits paid early as lump sums; and
  • Whether different projection rates apply to employer-funded and employee-funded portions of the hypothetical cash-balance account when converting to an age-65 annuity.

The Second Circuit affirmed the district court’s order implementing the mandate from McCutcheon II, holding that (1) no PRMD may be used in calculating any portion of the residual annuity that a participant has earned and (2) a single interest-rate assumption (the “20+1% rate”) applies across both employer and employee contributions under the plan. In so doing, the court enforced the law-of-the-case doctrine against the defendants’ new arguments.

Summary of the Judgment

On April 26, 2024, the Southern District of New York entered a revised final judgment directing Colgate-Palmolive to recalculate certain residual annuity benefits in accordance with the Second Circuit’s earlier opinion in McCutcheon II. Defendants appealed. The court of appeals, in a summary order, affirmed:

  1. It held that the question whether to apply a PRMD to reduce residual annuity benefits when paid early had been litigated and decided in McCutcheon I and II. Having failed to raise any opposition in the district court or to challenge that ruling on the first appeal, defendants were barred by the law-of-the-case doctrine from reopening the issue.
  2. It rejected defendants’ attempt to apply a lower projection rate to employee-funded contributions. Our prior mandate required using the 20+1% rate to convert the entire hypothetical cash balance into an age-65 single-life annuity, and defendants could not raise a new contention at this stage.
  3. The judgment of the district court was therefore affirmed without modification.

Analysis

Precedents Cited

The opinion relies principally on two pillars of appellate practice:

  • Law-of-the-Case Doctrine: A rule that once an appellate court decides an issue, it is bound by that decision on remand and subsequent appeals, absent exceptional circumstances. Key authorities:
    • Havlish v. 650 Fifth Ave. Co., 934 F.3d 174, 181–82 (2d Cir. 2019)
    • Callahan v. County of Suffolk, 96 F.4th 362, 367 (2d Cir. 2024)
  • Mandate Rule: A corollary to law-of-the-case that the district court must implement the appellate court’s mandate “scrupulously and fully.” See Callahan, 96 F.4th at 367.

Legal Reasoning

1. Pre-Retirement Mortality Discount
Plaintiffs’ complaint identified “Error 3” as two separate but related calculations in which a PRMD was applied unlawfully. At the summary-judgment stage in McCutcheon I, defendants did not oppose plaintiffs’ motion on Error 3. The district court granted summary judgment, holding that applying a PRMD to a benefit that does not decrease on the participant’s death results in an impermissible forfeiture. On the first appeal (McCutcheon II), defendants again did not distinguish the two PRMD applications; the Second Circuit affirmed that no PRMD may be used when calculating the actuarial equivalent of lump sums or the early retirement adjustment to the residual annuity. Now defendants argued—for the first time—that one of those two applications should be treated differently. The court held they were too late: the issue was ripe and had been decided, so the law-of-the-case doctrine barred reconsideration.

2. Uniform Projection Rate
Under the Plan’s Appendix C § 2(b)(ii), a participant’s “PRA annuity” is the actuarial equivalent, at age 65, of (a) the hypothetical cash-balance account funded by employer contributions and (b) the participant’s elective contributions. In McCutcheon I, the district court applied the Plan’s specified “20+1%” rate to the entire cash-balance conversion. On the first appeal, defendants argued only over § 1.3’s applicability to that conversion; the court affirmed that § 1.3 mandates the 20+1% rate for all components. On remand, defendants for the first time contended that employee contributions could be projected at a different (lower) rate. Because that argument was “foregone” on the prior appeal, law-of-the-case barred it, and the court enforced the single-rate mandate.

Impact

This summary order—though non-precedential—reinforces two important lessons:

  • Finality of Appellate Decisions: ERISA plan sponsors cannot wait until after a mandate to raise new interpretations of the same documents or calculations previously before the court. They must present all arguments on the first review, or forfeit them forever.
  • Strict Adherence to Plan Terms: Once a plan’s governing provisions (e.g., §§ 1.3 and Appendix C) prescribe an interest-rate assumption, fiduciaries must follow it across all components of benefit conversion, without carving out sub-categories.

Complex Concepts Simplified

  • Pre-Retirement Mortality Discount (PRMD): An actuarial reduction to cash-balance benefits to account for the chance a participant dies before normal retirement age. The court held that applying it to benefits that would otherwise never decrease on death unlawfully shortchanges the participant.
  • Actuarial Equivalent: The value today of a stream of future payments (an annuity) converted into a lump sum using assumptions about interest and mortality.
  • Hypothetical Cash-Balance Account (PRA): Under the amended Plan, employer contributions accumulate with interest credits; at retirement the PRA balance may be paid as a lump sum or converted into an annuity.
  • Law-of-the-Case Doctrine: Once an appellate court resolves an issue, trial courts and later panels must follow that resolution unless extraordinary circumstances exist.

Conclusion

McCutcheon v. Colgate-Palmolive Co. (2025) underscores the twin imperatives of thorough advocacy and strict plan compliance in ERISA litigation. Participants challenging benefit calculations may rely on finished appellate rulings to secure final judgments. Plan fiduciaries, in turn, must present all interpretive disputes at the first opportunity, and must apply plan terms—such as the uniform 20+1% projection rate—consistently. The decision serves as a cautionary tale: failure to oppose an argument early can lead to permanent forfeiture of that defense under the law-of-the-case doctrine.