Colgate-Palmolive has agreed to pay $332 million to resolve a long-standing class action suit if the company’s computation of pension benefits for about 1,177 retirees is disputed. The settlement, which was filed in federal court in Manhattan on August 29, 2025, awaits the approval of Judge Lorna G. Schofield. After subtracting legal expenses and fees, employees would receive about $232.7 million.
Background on pension litigation
The litigation stems from a change in the pension plan structure made by Colgate-Palmolive back in 1989 when the company went from a traditional pension plan to one based on cash balance. This conversion allowed participants to take their benefits as lump-sum payments as opposed to monthly annuities and fundamentally changed the way that retirement benefits were considered and paid.
The real issue occurred when Colgate, in 2005, added what is called the “Residual Annuity Amendment,” which was an attempt to rectify what it believed to be improper forfeiture of benefits to workers. The improper forfeiture stemmed from terminating employees who opted for lump-sum distribution and, under this amendment, these were less than what was due to them as the actuarial equivalent of their annuity benefits. It purportedly sought to make an equivalent additional annuity payment for such retroactively ill-treated workers.
Who gets paid?
The settlement affects former Colgate-Palmolive employees who were participants in the Company Employee Retirement Income Plan. The workers specifically affected include:
- Accrued benefits under the old, grandfathered annuity system, as well as the Personal Retirement Account (PRA) system set up during the 1989 conversion. These employees worked for the company both before and after the pension plan conversion and thus have the right to have benefits calculated under a number of formulas.
- Have, at some point, opted for a lump-sum retirement benefit payment instead of an annuity payable monthly until death after leaving the company. The errors in the calculations affecting this group were indeed sizable since the lump-sum-conversion requires very complicated actuarial calculations, which Colgate allegedly didn’t execute accurately.
How the 2005 amendment’s calculation errors wound up hurting claimants
The second subgroup affected were those workers who were negatively influenced by the 2005 Residual Annuity Amendment-in a good way, but not entirely-so many never became aware of the harmful issues in the workings of their companies until 2011, well after the other class action came to light.
The suit traced its way through two core sets of calculation errors that were later ruled by courts to have violated the Employee Retirement Income Security Act (ERISA). The first stemmed from Colgate’s blatant ignoring of the correct implementation of residual annuities under the 2005 amendment. The Second Circuit Court of Appeals stated in 2023 that Colgate’s manner of calculation was “unambiguous” in being wrong and was required to be enforced according to the common meaning.
The improper application of pre-retirement mortality discount would have been the second major hurdle thrown in Colgate’s path when calculating benefits for those workers who retired before age 65. It was determined by the courts that such a practice brought ERISA unlawful forfeitures, since it was reducing benefits under what employees legitimately earned.
In addition, the company misused different interest rates while projecting employee contributions and the portions funded by the employer into retirement accounts, while the judgment stated that there must be uniformity in applying the interest rate to both factors of computation.
The court timeline
Approaching two decades, the timeline for this legal battle has seemed endless. While Colgate’s pension calculations faced legal challenges beginning in 2007, the class action announced by the settlement was not filed until in 2016.
The proceedings attracted class certification in 2017, followed in 2020 by a partial summary judgment for the retirees, with this partial success confirmed by the Second Circuit in March 2023. This represented the legal mechanism upon which much of the settlement was anchored.
Of note, this settlement resolves only the newest-litigated case in a whole series of pension claims made against Colgate-Palmolive. A prior ERISA class action against the company was settled for $45.9 million, but that settlement expressly carved out claims under the 2005 Residual Annuity Amendment.
Settlement payment and distribution
Under the preliminary settlement, members of the affected class are to receive a combination of both one-time lump-sum and future ongoing annuity payments. The entire $332-million settlement reflects Colgate’s recognition of the errors in pension calculations, but without admitting any specific wrongful conduct.
Rather, Colgate-Palmolive states that it settled in order to eliminate the risks and costs associated with further litigation. The company had already made provisions for this settlement in 2023 early in the first quarter and again in the first quarter of 2025; thus, it indicates that this was a voluntary resolution tremendously anticipated by the company.
Consequences for affected retirees
For the 1,177 affected workers, this settlement represents the conclusion of a long legal saga started when many were still employed by Colgate-Palmolive. On average, the payout per affected worker would be about $198,000 before the deduction of legal fees. However, the amount would vary from one individual to another, depending on the worker’s specific pension calculations and actual calculations of delay in payments.
This settlement will particularly help workers who took lump-sum distributions from monthly annuity alternatives, since the brunt of the calculation error burden fell on this group. By then, many of them would have found it quite hard to keep track of financial planning decisions pertaining to their retirement based on the wrong benefit amounts initially received from Colgate-Palmolive.
Read more: $1,702 stimulus check hits this week for Americans in one state; check if you’re on the list
Read more: $10,000 per child: Texas school vouchers scheme goes into effect today, but there’s a catch
