Duke agrees to settle lawsuit with ex-workers over pension payments
Duke University has made the decision to settle a class action lawsuit filed by former employees who accused the institution of providing inadequate pension benefits. The lawsuit was initiated by retired Duke Health nurse Joy Franklin in September 2023, wherein she alleged that the University failed to use an up-to-date formula to determine pension benefits. This outdated method reportedly led to millions of dollars being withheld from former employees, breaching the Employee Retirement Income Security Act (ERISA).
Duke initially attempted to dismiss the case and enforce arbitration, suggesting a third party facilitate a resolution outside the court system. However, U.S. District Judge Catherine Eagles rejected Duke’s plea in February. Subsequently, the University contested Eagles’ decision by appealing the case, moving it from the U.S. District Court for the Middle District of North Carolina to the 4th U.S. Circuit Court of Appeals in March. Despite scheduled oral arguments for the appeal, on Jan. 14, Duke informed the appeals court of a pending settlement with Franklin, prompting a halt in legal proceedings to finalize the settlement and seek approval from the district court. The exact settlement amount remains undisclosed.
University officials have refrained from commenting on the settlement, while Franklin was unavailable for immediate comment. According to court documents, Franklin, who had served as a clinical registered nurse in the cardiac intensive care unit in the Duke University Health System until her retirement in 2018, claimed that Duke’s utilization of outdated actuarial equivalency formulas violated ERISA, diminishing her monthly pension.
As per ERISA regulations, individuals opting for a pension plan other than the standard single-life annuity (SLA) must receive an actuarial equivalent. Franklin, who selected the qualified joint survivor annuity (QJSA) – a plan providing a lifetime annuity and, in case of the beneficiary’s death, half of the annuity to their spouse – contended that her payments did not reflect this equivalence. She argued that the University had previously based its actuarial formulas on decades-old data until July 1, 2023, when a new calculation method was introduced for improved benefits. However, the revised scheme was not applied retroactively to beneficiaries who commenced payouts before the amendment date.
Franklin reported that while she was eligible for a $2,081.78 monthly SLA benefit, she received $1,806.99 through the 50% QJSA plan, which was less than the SLA’s true value. Allegations by Franklin suggested that these practices not only affected her pension but potentially slashed payments by millions for about 7,500 other program participants. Additionally, Franklin accused Duke of contravening ERISA’s anti-forfeiture provisions and fiduciary responsibilities.
The settlement brings a resolution to this legal dispute that will provide relief to former employees who believed they were unjustly deprived of rightful pension benefits.
