A former employee of TECO Energy Inc., a Florida energy company, has filed a lawsuit against the company and the TECO Energy Group Retirement Plan. The lawsuit, filed on July 14 in the U.S. District Court for the Middle District of Florida, accuses the defendants of material omissions in the plan’s summary plan description, resulting in the plaintiff losing nearly $83,000 in lump sum pension benefits.
The lawsuit, filed by Alejandro Roche and others, alleges a breach of fiduciary duty by the defendants under the Employee Retirement Income Security Act (ERISA). The complaint focuses on the interest rates used by the plan to convert a grandfathered pension into a lump sum for certain beneficiaries. These participants, who were aged 40 or older prior to July 1, 2001, participated in the plan before the adoption of the lump sum rate.
According to the complaint, the plan fiduciaries failed to disclose the plan’s lump sum calculation methodology and the varying interest rates used in that methodology, depending on the distribution date. The plaintiff argues that if this information had been disclosed in the summary plan description, he would have elected to receive his lump sum pension one month earlier, resulting in an additional $83,000.
The complaint explains that the interest rate used to calculate the present value of a pension annuity has an inverse relationship with the lump sum amount. A higher rate leads to a smaller lump sum, while a lower rate leads to a larger lump sum. The plaintiff argues that TECO should have disclosed this information, especially as it could significantly impact the value of the pension.
The lawsuit contends that using a lookback interest rate in an increasing segment rate environment, as occurred in 2022, would inevitably result in a smaller lump sum payment if made in 2023. The plaintiff asserts that this constitutes a fiduciary breach.
Under the Department of Labor regulations, plan sponsors are required to provide comprehensive and understandable summary plan descriptions that inform participants of their rights and obligations under the plan. The lawsuit argues that TECO failed to meet this requirement.
Alejandro Roche worked for TECO or its predecessors from March 1990 until December 2, 2022, and was an eligible participant in the plan. TECO had 3,713 employees and an annual revenue of $2.7 billion in 2021, according to the complaint.
Roche is seeking to recover the shortfall in his lump sum pension benefit, as well as on behalf of other similarly situated participants. The lawsuit requests class-action status and applies to all grandfathered plan participants who received or will receive an optional pension lump sum in 2023, using the August 2022 segment rates.
The complaint asks the court to certify Roche as the representative of the class, instruct TECO to recalculate the lump sum pension using different segment rates, and order the plan to pay the difference between the two amounts to Roche and the class members. The complaint also seeks post-judgment interest and attorneys’ fees as permitted under ERISA.
Representatives for TECO Energy, Inc. and the TECO Energy Group Retirement Plan have not responded to requests for comment on the litigation.
