Colgate-Palmolive has agreed to pay $332 million to settle a long-running class-action lawsuit filed by employees who alleged errors in the calculation of their pension benefits.
The preliminary settlement, filed in the U.S. District Court for the Southern District of New York, covers 1,177 current and former employees and awaits judicial approval.
The dispute stems from changes made to Colgate’s retirement plan more than three decades ago.
In 1989, the company converted its traditional pension plan into a cash balance plan, allowing participants to receive lump-sum payments.
However, plaintiffs argued that the company miscalculated the value of these lump sums, resulting in underpayment of benefits.
Origins of the Colgate-Palmolive Case: From Plan Conversion to Legal Action
The roots of the case trace back to Colgate’s 1989 shift to a cash balance pension model.
This type of plan, often compared to defined contribution schemes, credits employees with a percentage of their annual compensation plus interest.
While the model offers portability and transparency, it has also been the subject of legal scrutiny across industries due to complex valuation methods.
In 2005, Colgate amended its plan to retroactively award annuity payments to participants who had received lump sums but had not received the full value of their benefits.
Despite this adjustment, employees claimed that the company continued to miscalculate payments, prompting litigation that formally began in 2007 and culminated in a 2016 complaint.
Settlement Details: Compensation and Legal Costs
Under the terms of the proposed settlement, employees will receive approximately $232.7 million after deducting legal fees and expenses.
The plaintiffs were represented by Gottesdiener Law Firm PLLC and Siri & Glimstad LLP, while Colgate-Palmolive was represented by Morgan, Lewis & Bockius LLP and Cravath, Swaine & Moore LLP.
Colgate has denied any wrongdoing but stated that it chose to settle to avoid the cost and uncertainty of prolonged litigation.
The company had already set aside funds for the settlement in its financial statements for the first quarters of 2023 and 2025.
Impact on Retirement Plan and Corporate Reputation
The settlement applies to participants in the Colgate-Palmolive Co. Employees’ Retirement Income Plan, which had 8,410 members and over $1.4 billion in assets as of the end of 2023.
While the company maintains that its pension practices complied with legal standards, the resolution of this case may prompt other firms to reassess their retirement plan calculations and disclosures.
The case—McCutcheon et al. v. Colgate-Palmolive Co. et al.—has drawn attention to the importance of transparency and accuracy in pension administration.
It also highlights the potential long-term consequences of plan conversions and retroactive adjustments.
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