Lost Pension Benefits in a Personal Injury Claim

Case Background

A 52-year-old plaintiff suffers a disabling personal injury, preventing them from continuing employment until retirement. Prior to the injury, the plaintiff participated in an employer-sponsored defined benefit pension plan. The injury reduced their credited service years and ultimately lowered the pension benefit they would have received at retirement.

Key Issues

1. Eligibility Loss – Whether the injury prevents the plaintiff from meeting service or vesting requirements.
2. Reduction in Accrued Benefits – Impact of fewer years of credited service on the pension calculation.
3. Early Retirement vs. Full Retirement – Whether the plaintiff is forced into early retirement with reduced benefits.
4. Discounting to Present Value – Calculation of the value of lost pension payments over the plaintiff’s expected lifetime.

Calculation Methodology

1. Establish Baseline Pension (But-For Scenario):
   • Determine years of service and final average salary the plaintiff would have achieved absent injury.
   • Apply pension formula (e.g., 2% × Final Average Salary × Years of Service).
2. Determine Actual Pension (Post-Injury Scenario):
   • Use actual years of service credited due to injury.
   • Adjust for possible early retirement reductions.
3. Calculate Difference (Loss):
   • Project annual pension benefit loss = (But-For Pension – Actual Pension).
4. Apply Mortality & Worklife Expectancy:
   • Use life expectancy tables to determine the expected duration of benefit payments.
5. Discount to Present Value:
   • Discount future losses back to the date of trial/valuation using an appropriate discount rate.

Example

• Without Injury: 30 years service × $70,000 average salary × 2% = $42,000 annual pension.
• With Injury: 20 years service × $65,000 average salary × 2% = $26,000 annual pension.
• Annual Loss: $42,000 – $26,000 = $16,000.
• Projected Duration: 20 years of retirement benefits.
• Present Value of Loss: ~$230,000 (depending on discount rate and mortality assumptions).

Conclusion

Lost pension benefits are a significant component of damages in personal injury cases. The calculation requires comparing the but-for and actual scenarios, projecting benefits, and discounting them to present value.

Expert Role

Charles S. Amodio, CPA has significant experience performing these types of calculations, along with other lost earnings computations resulting from personal injury, wrongful death, and employment disputes. To discuss a case with Charles, email him at camodio@fazforensics.com or call him directly at 518-288-2142.